10 U.S. consumer discretionary stocks that are on the rise


Gary Christie


January 31, 2023



Min Read

What are we looking for?

U.S. consumer discretionary stocks with attractive valuations and price performance.

The U.S. consumer staples sector has been outperforming the consumer discretionary sector over the past year. A ratio analysis of the Consumer Staples Select Sector SPDR Fund  (XPL) ETF versus the Consumer Discretionary Select Sector SPDR Fund ETF (XLP/XLY) has shown strong outperformance of defensive stocks when compared with discretionary/cyclical stocks since January, 2022. However, this relationship has started to reverse course. The ratio (XLP/XLY) is now down more than 14 per cent since posting a 52-week high on Dec 17. Although the trend remains up, favouring consumer staples/defensive stocks, the Consumer Discretionary Select Sector SPDR Fund (XLY) is the top-performing sector over the past week, with a gain of 6.53 per cent. We decided to dig into the sector in order to find stocks that are outperforming the broad market with attractive price performance and fundamentals.

The screen

We used Trading Central Strategy Builder to search for U.S. consumer discretionary stocks indicating solid fundamentals and price performance over multiple time frames.

We began by setting a minimum market capitalization threshold of $5-billion to focus on larger, more established companies in the market.

Next we screened for companies that are indicating a price/earnings ratio no higher than 15. The average P/E of the S&P 500 consumer discretionary sector index is 29.

We also applied a minimum five-year historical EPS growth rate of 20 per cent in order to screen for stocks with a long term track record of growing their earnings.

Finally, we filtered for U.S. consumer discretionary stocks that have a TC Quantamental Rating of 6 or higher. The TC Quantamental Rating is a proprietary stock ranking methodology developed by Trading Central. This metric ranks stocks on a scale of one to 10, with 10 being the most bullish and one being the most bearish. The TC Quantamental Rating uses a combination of valuation, growth, quality, price momentum and income as key metrics when ranking a company.

We have also included the dividend yield, five-day price performance, which must be positive, year-to-date and one-year return for your reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.

What we found

10 U.S. consumer discretionary stocks on the rise

Of the top 10 stocks that met our criteria, four are in the home building and construction sector.

Topping our list is U.S home builder PulteGroup PHM-N. The stock has a low P/E of 5.3, which has declined 4.19 year-over-year. The company’s five-year average EPS growth rate is at 33.5 per cent, and the stock has a TC Quantamental Rating of 6.79 out of 10. The stock has been in a strong uptrend since its October low, returning 43 per cent.

D.R. Horton (DHI-N), another home builder, has the largest market cap on our list at US$32.78-billion. The company has the second-highest five-year average EPS growth on our list at 43.2 per cent. The stock has a TC Quantamental Rating of 6.71, a P/E of 5.9 and has reversed 45 per cent from its Oct. 24 low and continues to trend higher.

BRP Inc. DOOO-Q, the Canadian recreational vehicle maker with shares listed on the NASDAQ, made our top 10 list. The company has a market cap of $6.3-billion, a TC Quantamental Rating of 6.76 and a five-year average EPS growth rate of 32.6 per cent. The stock price has been in a downtrend since posting a record high on Dec. 7, 2021, however the trend has started to reverse, with price action breaking above the 200 and 50-day moving averages back in December.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central with respect to investment in financial instruments. Investors should conduct further research before investing.

Gary Christie is head of North American research at Trading Central in Ottawa.

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Gary Christie

Head of North American Research