In this article we will take a look at the 15 best consumer discretionary stocks to buy now.
Consumer discretionary businesses sell items that are non-essential yet desirable for consumers. These include sports equipment, entertainment, luxury goods, home furnishing, automobiles, etc. Consumer discretionary stocks thrive during the period of economic stability. With the higher rate of employment, people tend to spend more leisurely.
Though 2020 was the year of economic uncertainties, the consumer discretionary sector, as a whole, managed to stand its ground. Consumer Discretionary Select Sector SPDR Fund (NYSE: XLY) has delivered a return of 34.03% to shareholders in the past year. Some sectors performed well compared with the others. According to Deloitte, in the U.S., personal consumption expenditure, or PCE, grew by 18% on recreational goods in 2020. Due to pandemic-related restrictions, health enthusiasts ended up setting up home gyms. Similarly, remote work also led the PCE on furnishing equipment to grow by 5.7%. On the other hand, spending on footwear/apparel and recreational services fell by 7.7% and 31.8%, respectively.
According to a report by McKinsey & Company, the sales of discretionary products are likely to hike in the U.S. as the country is recovering from the pandemic crisis due to vaccine rollout and stimulus payments. The report states that over 50% of the consumers, including millennials, plan to spend extra on beauty products, electronics, and apparel. Deloitte’s report, United States Economic Forecast, also stated that PCE is expected to grow by 7.6% in 2021.
Consumer discretionary companies like Comcast Corporation (NASDAQ: CMCSA), Nike, Inc. (NYSE: NKE), The Home Depot, Inc. (NYSE: HD), and Lowe’s Companies, Inc. (NYSE: LOW) have managed to increase their revenues in the past year or so. The demand for their products has risen significantly. The revenue of Nike, Inc. (NYSE: NKE) presented a massive growth of 96% year-over-year at $12.3 billion, mainly driven by increased demand in North America and China. Similarly, The Home Depot, Inc. (NYSE: HD) generated $37.5 billion in revenue, presenting 32.7% year-over-year growth.
In June, JP Morgan viewed the retail sector as one of the fastest expanding after the reopening of stores across the world. The investment bank has released a list of its top picks for investors. According to the firm, Target Corporation (NYSE: TGT), Williams-Sonoma, Inc. (NYSE: WSM), and Ulta Beauty, Inc. (NASDAQ: ULTA), The Home Depot, Inc. (NYSE: HD), and Lowe’s Companies, Inc. (NYSE: LOW) are some of the best consumer discretionary stocks to buy now.
According to FactSet, the revenue of the consumer discretionary sector is expected to present a 19.7% year-over-year growth in the second quarter of 2021. Automobile, apparel and luxury good, hotels and restaurants, and auto components are expected to remain winners in the sector, with a 60% year-over-year growth. One of the most famous luxury fashion retailers L Brands, Inc. (NYSE: LB) generated $3.02 billion in revenue in Q1, up from $1.65 billion in the prior-year quarter. Moreover, the LB stock has soared by 297.9% in the past year. Similarly, Capri Holdings Limited’s (NYSE: CPRI) revenue stood at $1.2 billion and the stock has gained 195% in the past year.
Photo by CardMapr.nl on Unsplash
With this context, let’s analyze our list of the 15 best consumer discretionary stocks to buy now. We took into account hedge fund sentiment, analysts’ ratings, long-term growth potential, and fundamentals while choosing these stocks.
Why use hedge fund sentiment to choose stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Consumer Discretionary Stocks to Buy Now
15. Shutterstock, Inc. (NYSE: SSTK)
Number of Hedge Fund Holders: 18
Shutterstock, Inc. (NYSE: SSTK) is a global technology company that offers an innovative platform for high-quality pictures, tools, and services. Along with this, the company provides stock music, stock images, and creative editing tools. Over 1 million people contribute to the company’s content and more than 200,000 images are added to the library every day. The company has customers in over 150 countries.
In Q1 2021, Shutterstock, Inc. (NYSE: SSTK) reported a net income of $36.6 million, up from $9.1 million during the same period last year. The EPS was recorded at $0.98, beating the consensus of $0.70. The revenue presented a 14% year-over-year growth at $183.3 million. Subscribers’ revenue also grew by 20% and accounted for $76.5 million of the gross revenue.
Image collection and footage collection also increased by 12% and 17%, respectively. In the first quarter, the company paid over $7.6 million in cash dividends to shareholders. Due to strong results, the company raised its FY21 guidance and expects revenue between $720 million to $730 million. In April, Truist raised its price target on Shutterstock, Inc. (NYSE: SSTK) to $102, with a ‘Buy’ rating. Needham also initiated its coverage on Shutterstock, Inc. (NYSE: SSTK) with a ‘Buy’ rating and appreciated the company’s growing subscription revenue. In the past year, SSTK has delivered a 164% return to shareholders.
As of Q1 2021, 18 hedge funds tracked by Insider Monkey have positions in Shutterstock, Inc. (NYSE: SSTK), worth $207.8 million. With 1.2 million shares, worth $109.3 million, Renaissance Technologies is the company’s largest shareholder.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT), and L Brands, Inc. (NYSE: LB), Shutterstock, Inc. (NYSE: SSTK) is one of the best consumer discretionary stocks to buy now.
Bernzott Capital Advisors released its fourth-quarter 2020 investor letter and mentioned Shutterstock, Inc. (NYSE: SSTK) and other stocks in it. Here is what the firm has to say about SSTK:
“Shutterstock (SSTK): Improved financial results and signs of recovering digital advertising markets both contributed to good stock performance for this provider of stock content. Its transition to a subscription business continues to progress.”
14. The Lovesac Company (NASDAQ: LOVE)
Number of Hedge Fund Holders: 18
The Lovesac Company (NASDAQ: LOVE) is an American furniture company that designs and manufactures a special kind of couch, known as Sactional. These couches are made of seats and sides that are rearrangeable through a tool-free interlocking system. It has over 70 company-owned showrooms with headquarters in Connecticut, U.S.
In Q1 FY22, The Lovesac Company (NASDAQ: LOVE) reported a net income of $2.1 million and EPS of $0.13, beating the consensus by $0.71. The company generated $82.9 million in revenue, up 52.5% from $54.4 million in the prior-year quarter. Comparable sales grew by 48.8% year-over-year. Comparable showroom sales remained the winner in the first quarter, as the segment showed a growth of 182.7%.
The Lovesac Company (NASDAQ: LOVE) attributed the strong numbers to showroom sales, after the resumption of normal activities. In June, BTIG raised its price target on the The Lovesac Company (NASDAQ: LOVE) stock with a ‘Buy’ rating. The firm appreciated the company’s massive growth in revenue as well as low production and warehouse costs. DA Davidson, Stifel and Craig-Hallum also raised their price targets on LOVE in June. In the past year, the LOVE stock has delivered a 128% return to shareholders.
As of Q1 2021, 18 hedge funds have positions in The Lovesac Company (NASDAQ: LOVE), up from 14 in the previous quarter. Scopus Asset Management is the company’s biggest shareholder, with shares worth $47.4 million.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT), and L Brands, Inc. (NYSE: LB), The Lovesac Company (NASDAQ: LOVE) is one of the best consumer discretionary stocks to buy now.
13. Leggett & Platt, Incorporated (NYSE: LEG)
Number of Hedge Fund Holders: 24
Leggett & Platt, Incorporated (NYSE: LEG) is an American manufacturer and furnishing company. Leggett & Platt, Incorporated (NYSE: LEG) was founded in 1883 and has headquarters in Missouri, U.S. It mainly specializes in manufacturing products that can be used in furniture, home, bedding, offices, seating, automobiles, and airplanes. LEG stands thirteenth on our list of the best consumer discretionary stocks to buy now.
In Q1 2021, Leggett & Platt, Incorporated (NYSE: LEG) reported net earnings of $355 million, up from $253 million during the same period last year. The company generated a revenue of $1.51 billion, presenting a 10% year-over-year growth. The EPS for the quarter stood at $0.64, beating the consensus by $0.22. In the first quarter, the board also increased the quarterly dividend to $0.42 per share. Due to strong quarterly results, the company raised its FY21 guidance by 17% compared with 2020 and expects revenue in the range of $4.8 to $5.0 billion and EPS of $2.55 to $2.75. In May, Raymond James raised its price target to $60 on Leggett & Platt, Incorporated (NYSE: LEG), with an ‘Outperform’ rating on the shares. Since the beginning of the year, Leggett & Platt, Incorporated (NYSE: LEG) has delivered a 35.19% return to shareholders.
The hedge funds are also taking interest in Leggett & Platt, Incorporated (NYSE: LEG), as 24 funds have positions in the company in Q1 2021, up from 20 in the previous quarter. The total value of these stakes is $83.2 million.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT), and L Brands, Inc. (NYSE: LB), Leggett & Platt, Incorporated (NYSE: LEG) is one of the best consumer discretionary stocks to buy now.
12. Skechers U.S.A., Inc. (NYSE: SKX)
Number of Hedge Fund Holders: 29
Skechers U.S.A., Inc. (NYSE: SKX) is an American lifestyle footwear company that manufactures and designs footwear for men, women, and children. The company is one of the biggest athletic footwear companies in the world. It also offers accessories, apparel, scrubs, etc. Founded in 1992, the company has headquarters in California, U.S. Skechers U.S.A., Inc. (NYSE: SKX) ranks twelfth on our list of the best consumer discretionary stocks to buy now.
In Q1 2021, Skechers U.S.A., Inc. (NYSE: SKX) reported net earnings of $98.6 million, up from $49 million during the same period last year. The EPS was recorded at $0.63, beating the market consensus by $0.17. The consolidated revenue grew by 15% year-over-year at $1.42 billion. In the first quarter, e-commerce sales grew by 143%. For Q2 2021, Skechers U.S.A., Inc. (NYSE: SKX) expects revenue in the range of $1.45 billion to $1.50 billion. In April, JP Morgan appreciated the company’s first-quarter earnings and upgraded the SKX stock to an ‘Overweight’ rating. Similarly, in July, Deutsche Bank raised its price target on SKX to $62, with a ‘Buy’ rating. The SKX stock gained 67.5% in the past year.
At the end of Q1 2021, 29 hedge funds tracked by Insider Monkey have positions in Skechers U.S.A., Inc. (NYSE: SKX), worth $531.7 million. Pzena Investment Management is the leading shareholder of the company, with 3.8 million shares, worth $162.3 million.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT), and L Brands, Inc. (NYSE: LB), Skechers U.S.A., Inc. (NYSE: SKX) is one of the best consumer discretionary stocks to buy now.
11. Williams-Sonoma, Inc. (NYSE: WSM)
Number of Hedge Fund Holders: 29
Williams-Sonoma, Inc. (NYSE: WSM) is an American retail company that deals in kitchen-wares and home furnishing products. WSM ranks eleventh on our list of the best consumer discretionary stocks to buy now. As of 2021, the company has more than 625 stores located in over 60 countries. It is headquartered in California, U.S.
Williams-Sonoma, Inc. (NYSE: WSM) announced strong Q1 2021 results on 26th May 2021. Williams-Sonoma, Inc. (NYSE: WSM) reported net earnings of $227.8 million, up from $35.4 million during the same period last year. The EPS beat the market consensus by $0.10 at $2.93. Net revenue also grew by 40.4% year-over-year at $1.74 billion.
Pottery Barn generated $679 million, whereas West Elm accounted for $477 million of the gross revenue. Due to the strong numbers, the company raised its guidance for the fiscal year 2021. The board of the company declared a quarterly dividend of $0.59 per share. In June, BofA upgraded Williams-Sonoma, Inc. (NYSE: WSM) to ‘Neutral’, with a $180 price target. Other investment banks such as Wells Fargo, Wedbush, and Loop Capital also raised their price targets on WSM in May. Since the beginning of the year, Williams-Sonoma, Inc. (NYSE: WSM) has returned 49.9% to shareholders and has gained 82% in the past year.
As of Q1 2021, 29 hedge funds tracked by Insider Monkey have positions in Williams-Sonoma, Inc. (NYSE: WSM), worth $758.3 million. With over 2 million shares, worth $364.4 million, Select Equity Group is the largest shareholder of the company.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT), and L Brands, Inc. (NYSE: LB), Williams-Sonoma, Inc. (NYSE: WSM) is one of the best consumer discretionary stocks to buy now.
10. Hasbro, Inc. (NASDAQ: HAS)
Number of Hedge Fund Holders: 31
Hasbro, Inc. (NASDAQ: HAS) is an American gaming and entertainment company that produces toys, media assets, and board games. Some of the company’s famous products include G.I. Joe, Transformers, Micronauts, Monopoly, Scrabble, Trivial Pursuit, etc. It was founded in 1923 and is operating in over 35 companies. HAS ranks tenth on our list of the best consumer discretionary stocks to buy now.
In Q1 2021, Hasbro, Inc. (NASDAQ: HAS) reported net earnings of $138.4 million, up 78% from $77 million during the same period last year. The EPS of $1.00 beat the estimate by $0.35. The consolidated revenue stood at $1.11 billion, 14% of which was generated by consumer products and digital gaming accounted for 15%. The company paid $93.4 million in dividends in the first quarter and declared a quarterly dividend of $0.68 per share. In April, KeyBanc raised its price target on the HAS stock to $105, with an ‘Overweight’ rating on the shares. After hitting an all-time low of $46 in March 2020, the HAS stock has been consistent, gaining 20.5% in the past year.
As of Q1 2021, 31 hedge funds tracked by Insider Monkey have positions in Hasbro, Inc. (NASDAQ: HAS), worth over $277 million. Scopus Asset Management is the largest shareholder of the company, with shares worth $57.6 million.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT), and L Brands, Inc. (NYSE: LB), Hasbro, Inc. (NASDAQ: HAS) is one of the best consumer discretionary stocks to buy now.
9. Ulta Beauty, Inc. (NASDAQ: ULTA)
Number of Hedge Fund Holders: 46
Ulta Beauty, Inc. (NASDAQ: ULTA) is an American chain of beauty stores with headquarters in Illinois. The company manufactures and markets cosmetics, skincare products, fragrances, body and hair care products, and beauty tools. ULTA ranks ninth on our list of the best consumer discretionary stocks to buy now.
In Q1 2021, Ulta Beauty, Inc. (NASDAQ: ULTA) reported a net income of $230.3 million, up from $78.5 million during the same period last year. The EPS of $4.10 beat the market consensus by $2.15. Net sales presented 65.2% year-over-year growth at $1.9 billion, massively driven by the cosmetic segment which accounted for 45% of the gross sales. On the other hand, skincare products generated 19% of the revenue. Due to the strong results, the company revised its guidance and expects revenue in the range of $7.7 billion to $7.8 billion. Many investment banks recently raised their price targets on the ULTA stock, such as Loop Capital, DA Davidson, and Morgan Stanley. In July, Raymond James upgraded ULTA to ‘Outperform’ with a $395 price target. In the past 12 months, the ULTA stock has delivered a 63.7% return to shareholders.
The number of hedge funds having positions in Ulta Beauty, Inc. (NASDAQ: ULTA) increased to 46 in Q1, compared with 43 in the previous quarter. The total value of these stakes is $1.43 billion. Select Equity Group is the largest shareholder of the company, with 2.3 million shares, worth $730.7 million.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT), and L Brands, Inc. (NYSE: LB), Ulta Beauty, Inc. (NASDAQ: ULTA) is one of the best consumer discretionary stocks to buy now.
8. Capri Holdings Limited (NYSE: CPRI)
Number of Hedge Fund Holders: 47
Capri Holdings Limited (NYSE: CPRI) is a fashion luxury company with headquarters in New York, U.S. CPRI stands eighth on our list of the best consumer discretionary stocks to buy now. The company sells clothes, watches, fragrances, handbags, shoes, and other fashion accessories. It was founded in 1981 by one of the most acclaimed designers, Michael Kors.
In Q4 FY21, Capri Holdings Limited (NYSE: CPRI) reported a net income of $59 million, up from $16 million in the prior-year quarter. The EPS was recorded at $0.38, beating the estimate by $0.36. The company reported an 80% growth in e-commerce sales, with a 13% growth in retail sales.
Michael Kors accounted for $838 million of the gross revenue, whereas Versace generated $235 million in the fourth quarter. For Q1 FY22, the company expects revenue of approximately $1.1 billion, with EPS of $0.75. In July, Goldman Sachs initiated its coverage on the CPRI stock with a price target of $56. MKM Partners, Morgan Stanley, and Credit Suisse also raised their price targets on CPRI due to strong quarterly earnings. In the past year, the CPRI stock has soared by 195%.
As of Q1 2021, 47 hedge funds have positions in Capri Holdings Limited (NYSE: CPRI), up from 42 in the previous quarter. Rima Senvest Management is the biggest shareholder of the company, with over 3.7 million shares, worth $193.2 million.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT), and L Brands, Inc. (NYSE: LB), Capri Holdings Limited (NYSE: CPRI) is one of the best consumer discretionary stocks to buy now.
Avory & Co published its Q4 2020 investor letter and mentioned Capri Holdings Limited (NYSE: CPRI) in it. Here is what the firm has to say about CPRI:
“John Idol, was amongst the most nimble and resilient CEOs in 2020. Capri, as most of the retail sector, faced various challenges; 1) Supply disruptions in their leather goods as a result of the large impact covid had on Italy, 2) Dwindling demand as brick and mortar locations were forced to shut down globally and 3) Debt due in December of 2020. John acted quickly and reduced his cost base through global furloughs, delayed reopenings, turned to social selling and clienteling, was able to refinance all the debt in 2020 and pushed it out multiple years, along with getting their three brands, Jimmy Choo, Versace, and Michael Kors to positive or mid negative single-digit comparable sales by August. Coming out of Covid Capri is a leaner business. Versace is realizing positive sales, and they now expect 2020 to be a profitable year. We believe that this type of management execution can and should totally transform the narrative around this company for many years to come.”
7. L Brands, Inc. (NYSE: LB)
Number of Hedge Fund Holders: 59
L Brands, Inc. (NYSE: LB) is an American fashion retailer, founded in 1963. The company owns some of the famous brands, including Victoria’s Secret, La Senza, Henri Bendel, Bath & Body Works, etc. It is headquartered in Columbus, Ohio. Recently, the company has announced the separation of Victoria’s Secret into an independent company. LB stands seventh on our list of the best consumer discretionary stocks to buy now.
In Q1 2021, L Brands, Inc. (NYSE: LB) reported a net income of $356.7 million, compared with $275.2 million during the same period last year. The EPS beat the consensus by $0.04 at $1.25. The strong numbers are mainly driven by the growth of sales at Victoria’s Secret and Bath & Body Works, both accounting for $1.5 billion and $1.46 billion of the gross revenue, respectively. Due to the strong quarterly results, many investment banks raised their price targets on the LB stock, such as Evercore ISI, B.Riley, RBC Capital, Deutsche Bank, etc. In July, Evercore ISI raised its price target on LB to $100, with an ‘Outperform’ rating. Since the beginning of the year, the LB stock has delivered an 83.7% return to shareholders.
Hedge funds are also turning bullish on L Brands, Inc. (NYSE: LB), as 59 funds have positions in the company as of Q1 2021, up from 52 in the previous quarter. The total value of these stakes is $5.93 billion. Lone Pine Capital is the company’s largest shareholder, with 26.2 million shares, worth $1.62 billion.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Starbucks Corporation (NASDAQ: SBUX), and Target Corporation (NYSE: TGT), L Brands, Inc. (NYSE: LB) is one of the best consumer discretionary stocks to buy now.
6. Target Corporation (NYSE: TGT)
Number of Hedge Fund Holders: 60
Target Corporation (NYSE: TGT) is a general retailer that sells a wide range of products, including household essentials, home décor, electronics, kitchen and dining, beauty, personal care, etc. The company has 1,909 stores in the U.S. and owns over 48 brands. TGT stands sixth on our list of the best consumer discretionary stocks to buy now.
In Q1 2021, Target Corporation (NYSE: TGT) generated a revenue of $24.2 billion, up 23.4% year-over-year. The company hit its all-time high EPS of $3.69, beating the market consensus by $1.44. Comparable sales grew by 22.9% in the first quarter whereas comparable digital sales grew by over 50%. Sales of apparel and home grew by 60% and 30%, respectively. Target’s board announced a quarterly dividend of $0.90 per share, presenting a 32.9% growth.
In June, Argus raised its price target on the TGT stock to $265, with a ‘Buy’ rating. Morgan Stanley’s analyst, Simeon Gutman, also appreciated TGT and he expects the stock to deliver upside in 2021. In the past year, TGT has delivered a 106.4% return to shareholders.
Of the 866 hedge funds tracked by Insider Monkey, 60 funds have stakes in Target Corporation (NYSE: TGT), worth $4.76 billion. GQG Partners is the largest shareholder of the company, with 3.9 million shares, worth $791.3 million.
Like Nike, Inc. (NYSE: NKE), Comcast Corporation (NASDAQ: CMCSA), Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), and Starbucks Corporation (NASDAQ: SBUX), Target Corporation (NYSE: TGT) is one of the best consumer discretionary stocks to buy now.
In its first-quarter investor letter, LRT Capital Management mentioned Target Corporation (NYSE: TGT) and other stocks. Here is what the firm has to say about TGT:
“Target, the Minneapolis-based retailer, continues to fire on all cylinders as the company has reported two quarters in a row of +20% revenue growth (5% traffic growth + 15% average basket size6), coupled with the strongest EBITDA margins in over four years. The company has successfully navigated the Covid-19 pandemic with online sales growing by 155% and 118% during Q3 2020 and Q4, respectively.
On March 2nd, the company reported another stellar quarter, with same-store sales growing by over 20%, and both earnings (+57% YoY) and revenues (+21% YoY) beating estimates. The shares are up 14.11% year-to-date. We believe the shares are a bargain 23x trailing and 20x forward earnings.”
5. Lowe’s Companies, Inc. (NYSE: LOW)
Number of Hedge Fund Holders: 61
Lowe’s Companies, Inc. (NYSE: LOW) is an American retail company that deals in home improvement. The company started as a hardware store in North Carolina and is now one of the largest home improvement organizations in the world. It serves over 20 million customers per week and has more than 300,000 associates in the U.S. and Canada.
In Q1 2021, Lowe’s Companies, Inc. (NYSE: LOW) reported net earnings of $2.3 billion, compared with $1.3 billion during the same period last year. The EPS was recorded at $3.21, beating the estimate by $0.59. The company generated $24.4 billion in revenue, up from $19.7 billion in the prior-year quarter. Comparable sales in the U.S. also grew by 24.4% in the first quarter. The company’s board announced a quarterly dividend of $0.80 per share, showing a 33% growth. The company also paid $440 million in dividends during the quarter.
In June, Wells Fargo praised the company’s earnings and maintained an ‘Overweight’ rating on the LOW stock. Similarly, in May, RBC Capital also acknowledged a 24% growth in the company’s home improvement sector, and raised its price target on LOW to $240, with an ‘Outperform’ rating. The LOW stock has gained 38.05% in the past year.
As of Q1 2021, 61 hedge funds have positions in Lowe’s Companies, Inc. (NYSE: LOW), worth $5.17 billion. With 11.9 million shares, worth $2.27 billion, Pershing Square is the leading shareholder of the company.
Pershing Square Holdings Limited released its Q4 2020 investor letter and mentioned Lowe’s Companies, Inc. (NYSE: LOW). Here is what the company has to say about LOW:
“Lowe’s is a high-quality business with significant long-term earnings growth potential. We initiated our investment in the company in April 2018 largely because we believed that the hiring of a new high-caliber management team could dramatically improve the business and close the performance gap to its closest competitor, Home Depot. Marvin Ellison became CEO in July 2018, and immediately began working on a multi-year transformation plan to bolster Lowe’s retail fundamentals, reduce structural costs, expand distribution capabilities, and modernize systems and the company’s online capabilities.
In 2020, Lowe’s experienced unprecedented demand driven by consumers nesting at home, higher home asset utilization and a reallocation of discretionary spend. Lowe’s earlier decision to modernize the company’s online offering allowed it to meet consumers’ surging demand. Further, its commitment to improve the company’s retail fundamentals allowed Lowe’s to showcase its enhanced merchandising, greater in-stock-levels, and excellent customer service. In the fourth quarter, the company completed 95% of its store layout resets which include a more intuitive shopping experience complete with a more Pro-centric layout (by “Pro” we refer to the professional tradesmen that perform repair and maintenance, remodeling and construction services). The company is also rolling out a new Pro CRM tool, which should improve Lowe’s Pro market share…” (Click here to see the full text)
4. Starbucks Corporation (NASDAQ: SBUX)
Number of Hedge Fund Holders: 61
Starbucks Corporation (NASDAQ: SBUX) is an American coffeehouse chain and roastery. The company was founded in 1971 and has headquarters in Seattle. It started as a retailer and roaster of ground coffee, tea, and spices. As of 2021, the company has over 32,000 outlets in 80 countries.
In Q2 FY21, Starbucks Corporation (NASDAQ: SBUX) generated $6.7 billion in revenue, up from $5.9 billion, presenting an 11% year-over-year growth. The EPS of $0.62 beat the market consensus by $0.09. The U.S. accounted for $4.6 billion of the gross revenue, showing a 9% growth in comparable sales. Due to strong quarterly results, many investment banks raised their price targets on the SBUX stock, such as Oppenheimer, Tigress Financial, MKM Partners, and Morgan Stanley. In July, Oppenheimer raised its price target on SBUX to $140 and rated it as an ‘Outperform’. In the past year, the SBUX stock has delivered a 58.3% return to shareholders.
At the end of Q1 2021, 61 hedge funds tracked by Insider Monkey have positions in Starbucks Corporation (NASDAQ: SBUX), worth $4.4 billion.
Wedgewood Partners released its Q1 2021 investor letter and mentioned Starbucks Corporation (NASDAQ: SBUX) and other stocks in it. Here is what the firm has to say about SBUX:
“As we have observed Starbucks through the unpredictable events of the past year, we believe all the things we liked about the Company’s competitive position before the pandemic have been turbocharged by the pandemic. We always have maintained the Company had no serious competition, anyway, and that in both large growth markets (U.S. and China), there was enormous fragmentation of share that would allow the Company to continue to expand through market expansion (especially in China) and through share gain versus small competitors. In fact, when we last discussed Starbucks, there was a lot of noise about competition in China from a newly established domestic competitor, Luckin Coffee, and that situation quickly dissolved into farce. In any case, had Luckin been a legitimate business, we had maintained that China was a massive market – and one in which coffee consumption was massively underpenetrated in comparison to other markets. We believed too that there was plenty of room for multiple large competitors to exploit.
The pandemic disaster over the past year truly highlights the Company’s financial strength in comparison to its small competitors, most of which struggled to survive, and many of which didn’t make it. While there is no perfect data, we have seen estimates from industry groups and restaurant distributors that as many as 15-20% of small, independent restaurants across the broad food and beverage industry may have closed permanently as a result of the pandemic, sadly. Starbucks not only survived due to its superior financial position; they also used its financial resources to invest in a variety of expanded or new capabilities, including the addition of drive-through capacity, new “walk-through” pick-up locations in urban areas, increased investment in technology to drive speed within the stores and drive-through lanes, and expansion of its loyalty program. These could have been viewed, prior to the pandemic, as a fairly big advantage in terms of convenience alone versus the Company’s small primary competitors. In the age of the pandemic, though, one might consider something like a drive-through an absolute necessity, as customers choose not to expose themselves to the interior of restaurants or to other people…” (Click here to see the full text).
3. The Home Depot, Inc. (NYSE: HD)
Number of Hedge Fund Holders: 68
The Home Depot, Inc. (NYSE: HD) is a home improvement retailer that deals in products related to décor, furnishing, gardening, and construction. Along with this, the company also offers services related to home improvement. As of 2021, it has over 2,298 stores located in the U.S., Canada, and Mexico. The online store of The Home Depot, Inc. (NYSE: HD) currently has over 1 million products.
The first-quarter earnings of The Home Depot, Inc. (NYSE: HD) beat the analysts’ expectations due to increasing demand for improvement projects. The net earnings for the quarter were recorded at $4.1 billion, up from $2.2 billion during the same period last year. The EPS of $3.86 beat the market consensus by $0.78. Comparable sales also grew by 31% globally. Building material and décor accounted for $13.6 and $11.8 billion of the gross revenue, respectively. Moreover, the company’s online platform also grew by 27% and represented 14.3% of the net sales.
Recently, many investment banks raised their price targets on the HD stock, such as Loop Capital, Credit Suisse, and Truist. Following the strong first-quarter results, JP Morgan also raised its price target on HD to $345, with an ‘Overweight’ rating on the shares. The HD stock has gained $23% year to date.
At the end of Q1, 68 hedge funds tracked by Insider Monkey have positions in The Home Depot, Inc. (NYSE: HD), worth $4.3 billion.
Ensemble Capital recently released its first-quarter 2021 investor letter and mentioned The Home Depot, Inc. (NYSE: HD) and other stocks in it. Here is what the firm has to say about HD:
“Notable contributors to the Fund’s returns this quarter (included) Home Depot. Home Depot (8.9% weight in the Fund) continued to benefit from a red-hot housing and home improvement market, delivering record financial performance in 2020. As a high return on invested capital business, any step-up in growth results in considerable shareholder value creation. While 2021 comparable sales may not yield impressive headline results, we believe there are several secular tailwinds supporting continued housing investment, including millennials entering prime household formation/peak earnings years, relatively low interest rates, and government policies.
Home Depot (8.9% weight in the Fund): The big orange sign of Home Depot is a familiar sight for homeowners across the country. Despite the rise of Amazon, Home Depot has generated outstanding results for shareholders during the rise of eCommerce, even as Home Depot’s end market in housing suffered the worst collapse in a century. Over the last fifteen years, a period which began at the peak of the housing bubble, Home Depot’s stock has generated annual returns of 17% a year, outperforming the S&P 500 by approximately 7% a year…” (Click here to see the full text)
2. Nike, Inc. (NYSE: NKE)
Number of Hedge Fund Holders: 78
Nike, Inc. (NYSE: NKE) is an American multinational organization that designs, manufactures, and markets footwear, accessories, apparel, and athletic equipment. It is the global leader of athletic shoes and apparel and sells products in over 170 countries.
In Q4 FY21, Nike, Inc. (NYSE: NKE) reported a net income of $1.5 billion, up from $790 million during the same period last year. The EPS beat the market consensus by $0.42 at $0.93. Recently, Argus hiked its price target on NKE to $182, with a ‘Buy’ rating. In July, KGI Securities initiated its coverage on the NKE stock with an ‘Outperform’ rating.
At the end of Q1 2021, 78 hedge funds tracked by Insider Monkey have positions in Nike, Inc. (NYSE: NKE), worth $5.1 billion. With nearly 8 million shares, worth over $1 billion, Fundsmith LLP is the leading shareholder of the company.
Dynamo Cougar, a Brazilian investment management firm, published its fourth-quarter 2020 investor letter and mentioned Nike, Inc. (NYSE: NKE) and other stocks in it. Here is what it has to say about NKE:
“Nike used to have a very traditional IT infrastructure, which was the starting point for their transformation. Back in 2013 the company had most of their IT in one data center and two distinct IT and software development teams. The infrastructure was organized in a way that all IT solutions, such as Nike.com and Nike apps, were running on the same servers and databases. The result was that any change had to be approved and then deployed with the next release. It was a very manual process, depended on a number of different vendors, and had to be approved by a waterfall process involving both the software and the IT teams. As of 2018, the company has four AWS regions, 150 software engineers, three development locations, and multiple data center locations. In the process, the company decided that they would not just lift and shift their existing applications from their own servers to the public cloud, but instead decided to rethink every single component of their IT organization. The results show that this transformation worked. The organization went from one software deployment every two months to 2.6 deployments per day. Nike went from 90% manual software testing to 100% automated testing, which freed up a lot of developer time. They managed to reduce the time to make small changes on the website and apps from 3 hours to 5 seconds, which means they could react to sports and similar live events. In the past it took more than six months to add a new experience to their digital services, and today it takes one day. In the past they would have a 3-month lead time for new hardware and today they can scale and deploy without any lead time.5 The IT infrastructure now supports 50+ commerce countries versus 6 in 2012, supports 25 languages versus 7, and enables the e-commerce site to access the inventory of 500+ retail stores.
The early move to the cloud and the willingness to adapt to the new environment also allowed Nike to benefit from some significant learnings. For instance, the company first used the Cassandra database when they moved to the cloud. However, due to many technical limitations, it would not allow them to scale for peak demand. Peak demand was becoming a big problem because the Nike SNKRS App would launch products with very limited availability, which meant that millions of people would access the app at the same time. Nike then decided to move to the AWS DynamoDB database (a platform offering), which allowed them to scale up prior to these launches, and thereby spend 98% less than with Cassandra, while offering the same service. In addition, they managed to monitor the launches in real time, which allowed them to react to problems and error messages within seconds. The vast amount of data that is generated within this very short period is now analyzed with machine learning techniques to improve the stability, reliability, and optimization of future launches. The company is working on a number of other efforts that benefit from the cloud environment, such as the implementation of RFID whose data output is managed through the AWS IoT offering…” (Click here to see the full text)
1. Comcast Corporation (NASDAQ: CMCSA)
Number of Hedge Fund Holders: 88
Comcast Corporation (NASDAQ: CMCSA) is an American telecommunication company, with headquarters in Pennsylvania, U.S. The company owns some of the biggest entertainment channels, including Xfinity, NBCUniversal, Sky, NBC, etc. Recently, Netflix has announced its deal with Comcast Corporation (NASDAQ: CMCSA) for exclusive streaming rights for animated film features. CSCA tops our list of the best consumer discretionary stocks to buy now.
In Q1 2021, Comcast Corporation (NASDAQ: CMCSA) reported a net income of $3.5 billion, up 8.1% from $3.2 billion during the same period last year. The EPS beat the consensus by $0.17 at $0.76. Consolidated revenue also presented a 2.2% year-over-year growth at $27.2 billion. Xfinity accounted for $15.8 billion of the gross revenue, whereas NBCUniversal generated $7.0 billion. In the first quarter, the company’s free cash flow was $5.3 billion. The company paid $1.1 billion to shareholders through dividends.
The strong numbers secured positive ratings on the CMCSA stock from many investment banks, such as Benchmark, Raymond James, Craig-Hallum, etc. In June, Morgan Stanley stated higher expectations from NBCUniversal and Sky and raised its price target on CMCSA $70, with an ‘Overweight’ rating on the shares. In the past year, the CMCSA stock has delivered a $37.1% return to shareholders.
As of Q1 2021, 88 hedge funds tracked by Insider Monkey have positions in Comcast Corporation (NASDAQ: CMCSA), compared with 84 in the previous quarter. The total value of these stakes is $9.76 billion. With over 38 million shares, worth $2.06 billion, Eagle Capital Management is the biggest shareholder of the company.
ClearBridge Investments recently published its second-quarter 2021 investor letter and mentioned Comcast Corporation (NASDAQ: CMCSA) in it. Here is what the firm has to say about CMCSA:
“We funded the shift primarily with trims in Comcast following big gains in this name. Comcast is a long-term holding that have been and remain core holdings. During the quarter, however, we took gains and resized the positions to reflect their current risk-reward post strong increases in the stocks.
Comcast, like Blackstone, has been a meaningful long-term holding whose stock performance has at times lagged its robust fundamental performance. Over the last nine months the stock price caught up some with the fundamentals and looked like it had more room to run. Our thesis on the name evolved, however, following the May 17 announcement that competitor Discovery was merging its operations with Time Warner. This deal positions the new company as a credible competitor to Netflix, Amazon Prime, Hulu and Disney, and results in Comcast being left without the proverbial dance partner in the evolving pay TV/DTC landscape. While we continue to believe Comcast’s cable systems business is well-positioned and that NBCUniversal remains valuable, the competitive dynamic for NBCUniversal has stiffened. Our reduced position size reflects both our continued enthusiasm for many parts of the franchise and emerging concerns given the evolving pay TV/DTC landscape.”
You can also take a look at 12 Best Ecommerce Stocks to Invest In and 11 Best Materials Stocks for 2021.
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Disclosure. None. 15 Best Consumer Discretionary Stocks to Buy Now is originally published on Insider Monkey.
