We recently compiled a list of the 10 Best Consumer Discretionary Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Booking Holdings Inc. (NASDAQ:BKNG) stands against the other consumer discretionary stocks.

Many experts and analysts are concerned about a slowdown in consumer spending. However, reports show that consumer behavior is changing rather than slowing down. According to a report by Colliers Retail Market Intelligence, retail foot traffic rose by 4.4% in June, indicating strong consumer activity despite flat overall sales.

While furniture and home improvement stores saw declines due to reduced monumental purchases and a sluggish housing market, grocery stores, and apparel retailers performed better. Grocery sales grew by 1.7%, with a nearly 5% increase in foot traffic, as consumers managed their budgets despite cutting costs. Apparel sales also increased by 3.8%, driven by early back-to-school shopping and wardrobe updates, leading to an 8.3% rise in foot traffic.

In July, consumer spending saw a modest increase compared to June, with gains across 10 of 12 retail categories, as reported by the CNBC/National Retail Federation (NRF) Retail Monitor. Retail sales, excluding autos and gas, rose by 0.7% month-over-month, slightly up from June’s 0.5%, but the year-over-year growth slowed to 0.9%, down from 3.4% in June.

Core retail, which excludes restaurants, saw a 1% monthly increase. Significant sector performances included a 3.4% rise in gas station sales and a 2.1% increase in restaurant spending month-over-month. Conversely, the healthcare, personal care, and garden supplies sectors experienced slight declines.

June and July data together indicate that consumer spending remains resilient, supported by strong household finances and a strong job market. While some sectors, particularly furniture and home improvement, are struggling due to reduced consumer confidence and a slow housing market, other categories are performing well.

The data suggests that consumers are still willing to spend, especially on essential and seasonal items, though they may be more cautious with larger purchases. Despite some areas of decline, the overall retail environment appears stable, with consumers continuing to spend where they find value, which indicates a cautiously optimistic outlook for the remainder of 2024.

Latest Updates on Interest Rates and Potential Effects On Consumer Spending

In the July meeting, Fed Chair Jerome Powell highlighted the Fed’s ongoing focus on achieving maximum employment and stable prices. He noted significant progress in the economy, with inflation dropping from 7% to 2.5% and a balanced labor market with low unemployment at 4.1%. The Fed chose to keep interest rates steady within the 5.25% to 5.5% range and continue to reduce its securities holdings to maintain a restrictive stance, which is aimed at aligning demand with supply and reducing inflationary pressures.

Powell mentioned that while inflation has eased, the Fed is not yet ready to lower rates and requires more consistent positive data before making such a move, possibly as early as September. According to the CME Fed Watch Tool, all the experts are expecting cuts in September. 50.5% of the experts predict a 25 basis points (bps) reduction in the interest rates while 49.5% expect a 50 bps cut.

Rate cuts generally have a positive effect on consumer spending. When interest rates are lowered, borrowing becomes cheaper, which could lead to increased consumer borrowing and spending. This increased affordability can boost consumer confidence and promote spending on discretionary items. That’s a good set up for discretionary stocks, and with that, let’s look at the 10 best consumer discretionary stocks to buy according to hedge funds.

Our Methodology

For this article, we used the Finviz stock screener to identify over 50 large-cap consumer discretionary stocks then narrowed our list to 10 stocks that were most widely held by institutional investors as of Q1, and listed the stocks in ascending order of hedge fund sentiment.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Booking Holdings Inc. (NASDAQ:BKNG)

Number of Hedge Fund Holders: 97

Booking Holdings Inc. (NASDAQ:BKNG) is a leader in providing online travel and related services, offering a range of services such as hotel bookings, car rentals, flight reservations, and dining reservations. It is one of the best consumer discretionary stocks to buy according to hedge funds.

Through its well-known brands like Booking.com, Priceline, Agoda, Kayak, and OpenTable, the company strives to provide a complete travel planning experience. With a strong presence across over 220 countries and territories, Booking (NASDAQ:BKNG) has cemented its role as a leading provider in the online travel market, connecting users with a variety of travel options worldwide.

Booking (NASDAQ:BKNG) is well-positioned for continued growth, owing to a shift in traveler preferences and its ability to adapt to the evolving market. A survey by Trends Global Survey highlights that 80% of travelers now prefer to book their entire trip online, with Millennials and Gen Z leading this trend.

This shift towards online travel agencies (OTAs) presents a promising growth opportunity for Booking (NASDAQ:BKNG), which caters to this demand by providing a comprehensive platform where users can book flights, hotels, car rentals, and experiences, often at discounted rates.

In the second quarter, Booking (NASDAQ:BKNG) saw its revenue rise by 7.3% year-over-year, reaching $5.86 billion, surpassing Wall Street’s expectations of $5.77 billion. The company also saw a 7% increase in room nights booked, totaling 287 million. Gross travel bookings grew to $41.4 billion, reflecting a 4% increase compared to the previous year. The company’s EPS reached $44.38, marking a 27% year-over-year increase.

Booking’s (NASDAQ:BKNG) diverse service offerings continue to expand. The company’s emphasis on integrating artificial intelligence (AI) and technology has played a crucial role in this growth.

Innovations such as a generative AI-assisted trip planner and upgraded mobile applications have streamlined booking processes and enhanced user experiences. Additionally, the company has broadened its revenue streams with significant advancements in flights, ground transportation, and restaurant reservations through OpenTable.

While platforms like Airbnb, Inc. (NASDAQ:ABNB) have gained popularity, there remains a strong demand for traditional hotel accommodations and the convenience offered by OTAs. The coexistence of these options suggests a thriving market for both, with Booking (NASDAQ:BKNG) continuing to benefit from travelers’ need for comprehensive, efficient booking solutions.

In Q1, 97 hedge funds held stakes in Booking (NASDAQ:BKNG), with positions worth $7.9 billion. As of the first quarter, Fisher Asset Management is the most significant shareholder in the company and has a position worth $1.42 billion.

Wedgewood Partners stated the following regarding Booking Holdings Inc. (NASDAQ:BKNG) in its Q2 2024 investor letter:

“Booking Holdings Inc. (NASDAQ:BKNG) contributed to performance as travel spending across the U.S. and Europe remains quite healthy, whereas the Company took share in alternative accommodations, and looks set to expand margins after a few years of reinvestment. The Company has also been aggressively reducing its share count at reasonably attractive valuation multiples. Booking should be able to compound earnings at an attractive, double-digit rate for the next few years given these various initiatives.”

Overall BKNG ranks 3rd on our list of the best consumer discretionary stocks to buy according to hedge funds. You can visit 10 Best Consumer Discretionary Stocks To Buy According to Hedge Funds to see the other consumer discretionary stocks that are on hedge funds’ radar. While we acknowledge the potential of BKNG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BKNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.