Below we reveal the list of Top 5 Consumer Discretionary Stocks to Buy in 2021. For our methodology as well as further background on Mark Coe’s Intrinsic Edge Capital and more of the fund’s top consumer discretionary stock picks, please see Top 10 Consumer Discretionary Stocks to Buy in 2021.
5. Leggett & Platt, Inc. (NYSE:LEG)
Leggett & Platt, Inc. (NYSE:LEG) leads off the second-half of our list of top consumer discretionary stocks to buy. Intrinsic Edge first took a stake in the bedding and flooring company during Q2 and added heavily to that position in Q3, buying another 246,144 LEG shares. LEG shares have slipped by 9% over the past year but have gained 60% since the end of March 2020.
One of the 10 Best Dividend Stocks for Passive Income, LEG shares currently yield 3.74% annually and the company is closing in on Dividend King status, having raised its annual dividend for 49 consecutive years. Management confirmed during the company’s latest conference call that they remain committed to Leggett & Platt’s status as a dividend aristocrat, even as the company’s payout ratio pushes towards 80%, higher than it’s historically been.
4. 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS)
Intrinsic Edge also made a big addition to its 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) position during Q3, buying 468,316 shares to raise the size of its holding by 354%. There was a greater than 50% surge in hedge fund ownership of FLWS during the first half of 2020.
1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) has impressive fiscal Q2 results, growing its revenue by 45% year-over-year thanks to a 60% surge in online sales, while its $1.71 in earnings crushed estimates and were up by more than 50% year-over-year. The company’s operations are highly seasonal however, which partly explains why earnings are expected to slide to a loss during fiscal Q3.
3. Boyd Gaming Corporation (NYSE:BYD)
Boyd Gaming Corporation (NYSE:BYD) is another gambling stock with a prominent position in Intrinsic Edge’s 13F portfolio. Intrinsic Edge has built a large BYD position of 497,528 shares after first adding the stock to its portfolio during Q2.
Intrinsic Edge clearly sees great potential in the strategic partnership between Boyd Gaming and International Game Technology (NYSE:IGT), its top stock pick, a partnership which was expanded last year to put IGT’s self-service sports betting kiosks into Boyd’s casinos, among other initiatives. Hedge funds like Boyd’s sports betting opportunity, which includes a growing mobile betting app, as well as its geographical diversity and lack of reliance on a robust travel industry, which has hampered some of the bigger names in the sector.
2. The Cheesecake Factory Incorporated (NASDAQ:CAKE)
Intrinsic Edge opened a large position in The Cheesecake Factory Incorporated (NASDAQ:CAKE) during Q3, buying just under 691,000 shares valued at $19.17 million on September 30, perhaps in anticipation of positive developments on the coronavirus vaccine front. Those developments started in early November and CAKE shares have gained over 50% since.
The restaurant operator has understandably struggled through the pandemic, but its execution has nonetheless been relatively strong, with revenue and comparable sales both beating estimates in Q3. Hedge funds have also been impressed by the company’s off-premise sales, which surged during the initial pandemic lockdowns and have largely been maintained even as dining rooms have reopened.
1. International Game Technology (NYSE:IGT)
Topping the list of top consumer discretionary stocks to buy now is the aforementioned International Game Technology (NYSE:IGT). Intrinsic Edge owns 1.87 million IGT shares as of September 30, buying another 1.07 million shares during Q3. IGT shares have gained 25% over the last year and yield 4.49% annually.
The maker of slot machines, lottery games, and sports betting and casino management systems generates strong free cash flow when it isn’t being battered by pandemic headwinds, much of which is then returned to shareholders via dividends. In its Q3 investor letter, Mittleman Brothers projected IGT shares to hit $29, implying 9x EBITDA and 15x free cash flow of $400M.
For more great investment ideas in a highly competitive space, don’t miss the 12 Best Social Media Stocks To Buy Now and 10 Best Consumer Finance Stocks To Buy Now.
Disclosure: None.
