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7 Consumer Discretionary Stocks to Buy That Are Booking Record Profits


stocks to buy - 7 Consumer Discretionary Stocks to Buy That Are Booking Record Profits

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Are you looking for hugely profitable stocks to buy? For one, Petrobras (NYSE:PBR) — an oil company controlled by the Brazilian government — announced record second-quarter profits on Aug. 5. The surprise $8.3 billion in net income was the company’s best Q2 results in all of its history. 

Of course, it seems like the recent rise in oil prices is just the elixir the industry needed. After all, oil companies have taken it on the chin for the better part of two years now. But they’re not the only ones delivering record results today. 

Right now, companies in all kinds of industries are prospering while many Americans are still having a hard time paying rent. That separation is not necessarily a good optic for a country as wealthy as the United States. However, if you can look past the inequity, there are some excellent investments to make at the moment — investments in some incredibly profitable businesses. For this article, I’ll focus on my favorite sector: consumer discretionary stocks.

So, here are seven stocks to buy that are booking record profits.

  • General Motors (NYSE:GM
  • Sony (NYSE:SONY
  • Mohawk Industries (NYSE:MHK)  
  • Stellantis (NYSE:STLA
  • Wolverine Worldwide (NYSE:WWW)
  • Nike (NYSE:NKE)
  • Pool Corporation (NASDAQ:POOL)

Stocks to Buy: General Motors (GM)

General Motors (GM) sign with blue and white logo and brick building in background
Source: Jonathan Weiss / Shutterstock.com

As they say, beauty is in the eye of the beholder. 

When it comes to GM stock, General Motors reported its Q2 2021 results on Aug. 4. For the quarter, The Detroit News put out a headline that was full of good news, noting how the company reported “record first-half earnings” and upped full-year guidance. One CNBC article on the period was far more lukewarm, however:General Motors misses Wall Street second-quarter earnings expectations, raises 2021 guidance.”

That said, the important thing for investors to realize is that General Motors is on fire right now. For example, the first six months of the year generated $8.5 billion in pre-tax profit — a company record — on $66.6 billion in sales.    

Further, breaking down sales between automotive and finance, the automotive business saw sales increase 40.7% when comparing six-month periods. Meanwhile, GM Financial was basically flat year-over-year (YOY). However, on the profit side of things, it was a quarter like few others. As a result, GM expects full-year 2021 pre-tax profits of $12.5 billion at the midpoint of its guidance, up from $10.5 billion previously. 

That’s a tremendous jump and a big vote of confidence for this pick of the stocks to buy. CEO Mary Barra and the rest of the GM management team appear to be headed in the right direction.

Sony (SONY)

Sony logo on the side of a building at its offices in Silicon Valley.
Source: Sundry Photography / Shutterstock.com

Next up on this list of stocks to buy is SONY stock. This maker of the PlayStation 5 (PS5) reported record Q1 2021 results on Aug. 4, which included a $2.57 billion operating profit in the quarter, 26% higher than a year ago. On the top line, Sony’s sales increased about 15% to 2.26 trillion JPY ($20.4 billion).

Including its financial services business, Sony has six operating segments. While the Game & Network Services unit gets a lot of the glory because of the PlayStation, the company’s Music and Electronics segments actually experienced the most growth in Q1. 

For the quarter, the Music division generated a profit of $506 million, up 56% from $325 million a year earlier. Its sales for the quarter were $2.32 billion, 44% higher YOY. Additionally, the Electronics segment went from a roughly $80 million loss in Q1 2020 to a profit of around $650 million in Q1 2021. All six of its operating segments were profitable in the first quarter.

As CEO Yoshida Kenichiro said in May, the company isn’t planning to sell or hive off its Sony Pictures Entertainment division. It considers the business vital to its future creativity.

In Q1, Sony had free cash flow of $951 million. For the TTM through the end of June, FCF was about $8.2 billion. And as for its wildly popular PS5? Sony expects to sell 22 million by the end of fiscal 2021.

Stocks to Buy: Mohawk Industries (MHK)

Mohawk (MHK) logo on an iphone screen with a green background
Source: IgorGolovniov / Shutterstock.com

If you want an indication that the housing industry is doing well, Mohawk Industries’ Q2 2021 results make an excellent example. 

Mohawk is one of the world’s largest flooring companies and reported earnings on Jul. 30 that broke sales and profit records for the quarter. On the top line, MHK had sales of $3 billion, the highest quarterly sales in its history. On the bottom line, the company also had adjusted earnings per share (EPS) of $4.45 — also a company record. That beat the analyst estimate of $3.63 by about 23%. On the results, CEO Jeff Lorberbaum said the following:

“We greatly appreciate what they have been able to achieve. Our second quarter results were significantly stronger than we had anticipated across all of our businesses with sales building on a momentum from our first period. In the quarter, our operating margin expanded to their highest level in the last four years as we leveraged our operational and SG&A expenses.”

Once upon a time, MHK stock traded near the $300 mark. If it keeps generating the kind of growth it delivered in the second quarter, though, $400 might be its next stop. 

This company has been in restructuring mode for the past year. It has managed to deliver $95 million in savings, with another $15 million expected to meet its goal.

Interestingly, Mohawk is also building a nice-sized business in Russia of all places. Q2 had Russian sales of $116.4 million, 50% higher than a year earlier. While that only accounted for about 4% of overall sales, it’s still a sign that this pick of the stocks to buy is becoming more geographically diverse. 

Stellantis (STLA)

A flag with the logo for Stellantis waves outside a building with the logos for some of its car brands, including Abarth, Lancia, Fiat, Alfa Romeo and Jeep.
Source: Antonello Marangi / Shutterstock.com

STLA stock is the next name on this list of stocks to buy. Right now, the merger between Fiat Chrysler and Peugeot appears to be paying dividends for shareholders. On Aug. 3, the company reported its results for the first half of 2021 and they were very healthy

Thanks to higher car and truck prices, along with cost savings found since its January merger, Stellantis managed to generate an adjusted non-GAAP operating profit of 8.6 billion euros ($10.08 billion) during the quarter, considerably better than its H1 2020 operating profit of 752 million euros ($882 million).

On the top line, Stellantis also had sales of 75.3 billion euros ($88.28 billion) in the first half of the year, 46% higher than H1 2020 pro-forma revenues. 

As I wrote on Aug. 4, STLA is investing heavily ($35.6 billion) over the next five years to ensure it doesn’t get left behind in the low-emission vehicle (LEV) market. By 2030, it expects 40% of its sales to be from LEVs in the States, while LEVs will account for 70% of its sales in Europe.

However, what’s really exciting for owners of STLA stock is that all of its operating regions and businesses grew sales and adjusted operating income YOY. That is certainly a promising detail.

If you’re looking for an interesting way to play Stellantis, though, Exor (OTCMKTS:EXXRF) is the holding company of Italy’s Agnelli family. It owns 14.4% of the company, 22.9% of Ferrari (NYSE:RACE) and stakes in many other businesses.

Stocks to Buy: Wolverine Worldwide (WWW)

colorful clothes on a white rack with a bright yellow background
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Lululemon (NASDAQ:LULU) got a little more competition earlier this month when Wolverine Worldwide — the maker of Hush Puppies and Sperry shoes — pushed its way into the lifestyle apparel category by acquiring U.K.-based Sweaty Betty for $410 million.

So far, Sweaty Betty is expected to add approximately $250 million to Wolverine’s annual sales. WWW now expects to generate as much as $2.5 billion in 2021.

All in all, life is good for this Michigan-based company. It recently reported record Q2 2021 results that included a 17.5% YOY increase in direct-to-consumer revenue. That also marked a 68.8% increase over Q2 2019. Farther down the income statement, WWW reported a 12.6% increase in its operating margin as well.  

All in all, this pick of the stocks to buy has a strong balance sheet, with net debt of just $372.6 million as of its most recent quarter. So, it can definitely afford the acquisition, especially when it puts the company squarely into a competitive position in another apparel category. 

Year-to-date (YTD), WWW stock currently has a total return of about 20%, generally behind the broader U.S. market. However, that should change in the coming months as Wolverine hits its stride.   

Nike (NKE)

a stack of red Nike (NKE) shoe boxes
Source: mimohe / Shutterstock.com

Speaking of hitting one’s stride, we can’t discuss record profits without discussing the job Nike has done selling its sneakers and apparel worldwide during the pandemic. To me, one Forbes headline says it all: “Nike Annual Profits Soar 196%, Best In Company History.”

This company reported its Q4 2021 results in late June — and as the headline states, they were a thing of beauty. For the quarter, NKE made a net income $1.5 billion, significantly higher than its loss of $790 million a year earlier. On the top line, revenues also rose 88% (excluding currency) to $12.3 billion. In addition, its Nike Direct business saw sales increase by 73% to $4.5 billion, or almost 37% of revenue.

For the entire year, Nike’s sales rose 17% (excluding currency) to $44.5 billion. As a result, on the bottom line, it earned $5.73 billion in 2021, considerably higher than its 202o profit of $2.54 billion. Altogether, the company appears to be a well-oiled machine.

According to Telsey Advisory analyst Cristina  Fernández, “The strong momentum in Nike’s brand globally is more than offsetting pressure in China and supply chain constraints.” When it comes down to it, analysts like Nike. Out of 29 analysts covering NKE stock, 25 have it as either one of the stocks to buy or as “overweight.”

Right now, their average target price is $184.81, but I’d expect that to climb in the coming weeks. This is simply the best apparel stock out there. 

Stocks to Buy: Pool Corporation (POOL)

Yellow pool float, ring floating in a refreshing blue swimming pool
Source: Shutterstock

Last up on this list of stocks to buy is POOL stock, one of the world’s largest wholesale distributors of swimming pools and related outdoor living products.

This company continues to deliver for its shareholders. POOL went public back in 1995 at $10.50 a share and is worth around $490 today. How many stocks have delivered this kind of return over 25-plus years? Not many. 

Back in 2012, I highlighted POOL stock as one of my favorite consumer discretionary stocks. It remains one of my favorites because, as I said then: “What would summer be without a swimming pool?”

On Jul. 22, Pool reported record net sales of $2.85 billion for the first six months of fiscal 2021 — 45% higher than the same period a year earlier. On the bottom line, adjusted net income increased 84% for the first six months of the year to $358.4 million, or $8.78 per share. As a result of its record results, the company now expects EPS for the full year of at least $13.75, considerably higher than its previous guidance. 

In short, Pool is doing well. And is it any wonder that no less than three pool-related companies have gone public since the beginning of 2020? Right now, the business is hot.  

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2021/08/7-consumer-discretionary-stocks-to-buy-booking-record-profits/.

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