Although the blues of 2022 negatively impacted most sectors not tethered to the energy or defense sectors, some of the top consumer discretionary stocks to buy absorbed some of the worst hits. Initially, inflation woes ground down consumer sentiment. Later, the Federal Reserve responded strongly with interest rate hikes. Unfortunately, this action in part contributed to mass layoffs, which is inherently deflationary (i.e. fewer dollars chasing more goods).
Admittedly, this segment caters to contrarian risk-takers: it’s not for those that can’t handle volatility. At the same time, it may be too early to give up on certain consumer discretionary stocks. Here, investors must think cynically. If the broader economy does fall into a recession, some companies may benefit more than others.
As well, investors can indirectly advantage of other developments in the global markets, including the wealth gap, automotive dynamics, and even the blockchain. Curious? Read on to learn more about intriguing consumer discretionary stocks to buy.
Consumer Discretionary Stocks to Buy: PVH Corp (PVH)
While the company name PVH Corp (NYSE:PVH) might not resonate with most folks, its individual brands command international awareness. These include Tommy Hilfiger and Calvin Klein. In addition, PVH licenses brands such as Kenneth Cole New York and Michael Kors. Still, as a name within the ranks of consumer discretionary stocks, the company expectedly performed poorly this year.
Indeed, since the January opener, PVH dropped more than 41% in equity value. With so much uncertainty in the global economy, many consumers understandably slashed their expenditures. At the same time, PVH may represent one of the consumer discretionary stocks that can bounce higher. For one thing, shares gained nearly 23% of market value in the trailing month.
More importantly, workplace normalization may end up boosting PVH even higher. According to one report, 90% of companies will require their employees to return to the office at least part of the week starting in 2023. This dynamic may spark a wardrobe upgrade, which could help the apparel giant.
Consumer Discretionary Stocks to Buy: Nordstrom (JWN)
Founded in 1901, Nordstrom (NYSE:JWN) is a luxury department store chain synonymous with American consumerism during the analog era. During the current digital period, Nordstrom lost some of its swagger relative to its heyday. With e-commerce rivals challenging its throne, JWN came under pressure. As well, the circumstances associated with 2022 imposed significant challenges.
Still, as a luxury-focused name among consumer discretionary stocks, Nordstrom performed admirably. Yes, JWN is in the red since the start of this year. However, it’s only down by less than 8%, which is far better than what the benchmark S&P 500 could muster. Moreover, the company built positive near-term momentum. In the trailing five days, JWN gained 3% while in the trailing month, shares swung up over 7%.
Another factor moving in Nordstrom’s favor centers on its value proposition. According to data from Gurufocus.com, the market prices JWN at 8.5 times forward earnings. In contrast, the forward price-earnings ratio for the retail cyclical sector is nearly 14 times.
Consumer Discretionary Stocks to Buy: Williams-Sonoma (WSM)
Generally speaking, consumer discretionary stocks are among the first investment classes to tumble because people can always cut their spending. As well, the word “discretionary” implies not 100% necessary. Nevertheless, contrarian investors may want to give a second look at Williams-Sonoma (NYSE:WSM), the popular kitchenware and home furnishings retailer.
It all comes down to the affluent user base. While the current median household income in the U.S. is probably around $70,000, Williams-Sonoma’s typical customer hails from a household generating $100,000 of income. As such, people who shop at the trendy retailer will likely be more resilient should the smelly stuff hit the proverbial fan.
And similar to Nordstrom, Williams-Sonoma also features an attractively valued financial profile. Per data from Gurufocus.com, the market prices WSM at just a hair over 8 times forward earnings. This compares very favorably to the industry PE of 14 times (or lower than 84% of the competition).
H&R Block (HRB)
Although it’s a bit of a stretch, some investment resources label tax-preparation service provider H&R Block (NYSE:HRB) as a name among consumer discretionary stocks. In some ways, it makes sense. You don’t have to seek tax advice as you can always consult free government resources. Now, whether you agree with the classification or not, HRB inarguably represents a strong performer.
While so many publicly traded securities succumbed to the malaise of 2022, HRB finds itself up over 76% for the year thus far. To be fair, it’s been on a comparative lull lately, with shares gaining less than 5% in the trailing month. Still, the fundamentals could drive shares higher over the next several months to perhaps years. I’m confident because of the cryptocurrency fallout. With blockchain assets melting down, the severe volatility undoubtedly caused some investors to cash out. Naturally, this action creates a taxable event. Given how confusing crypto-related taxes are, HRB might enjoy a relevancy spike.
Thor Industries (THO)
For the final three ideas for consumer discretionary stocks, I’m going to explore the most speculative component, beginning with Thor Industries (NYSE:THO). An American manufacturer of recreational vehicles, the company sells towable and motorized RVs through its subsidiary brands. Of course, RVs commanded plenty of relevance during peak coronavirus fears. Today? Not so much.
Nevertheless, it’s possible that THO can rise compared to other consumer discretionary stocks because of the wealth gap. Essentially, the one segment of society that made out like bandits during Covid-19 was the exceptionally affluent. Should an economic downturn materialize, these are the folks that really won’t feel that much pain. Further, if Thor can attract this segment, it could ride out the storm.
Like other overlooked consumer discretionary stocks, Thor Industries finds itself being significantly undervalued. Per Gurufocus.com, Wall Street prices THO at 4.2 times trailing-12-month (TTM) earnings. For comparison’s sake, the sector median PE ratio is 16.6 times.
Easily one of the riskiest ideas among consumer discretionary stocks – or any category for that matter – used-car dealership CarMax (NYSE:KMX) succumbed to significant market pressure. Since the beginning of this year, KMX gave up over 47% of its equity value. Much of this volatility can be blamed on the Federal Reserve and its efforts to contain runaway inflation. Unfortunately, this action translates to higher interest rates, which imposes an affordability strain.
Still, even with prospects seemingly incredibly poor for CarMax, KMX managed to gain almost 8% in the trailing month. How can this be? While KMX represents one of the consumer discretionary stocks, the underlying business is also a necessity. For instance, with west-coast regions generally featuring less robust public transportation networks than the east coast, personal vehicles are indispensable.
As well, cars on U.S. roadways already reached a record average age of 12.2 years. At a certain point, it’s simply better for people to acquire a new (or newish) car than to keep repairing a money pit.
Marriott Vacations (VAC)
To be blunt, I presently don’t have the warm and fuzzies for the broader travel sector. Nevertheless, Marriott Vacations (NYSE:VAC) might be worth a look for speculators. Per its public profile, Marriott Vacations is a pure-play public timeshare company. Put another way, it’s revenge travel for the rich.
What makes VAC intriguing from the perspective of consumer discretionary stocks centers on market performance. True, the company is in the red for the year. However, with a loss of a bit over 13% YTD, it’s not the most garish shade of crimson. As well, in the trailing month, shares gained nearly 2% of equity value. It’s not much but it could be the early start of a sustained positive trend.
Financially, Marriott Vacations brings some food for thought. Based on Gurufocus.com’s proprietary calculation for fair market value, VAC may be modestly undervalued. In addition, the company features decently strong profit margins. If you like to gamble, VAC could be interesting.
On the date of publication, Josh Enomoto 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.