Everyone’s definition of “consumer stocks” is different.
Strictly speaking, I would say that companies operating in the consumer discretionary sector are the best examples of consumer stocks. However, others in the industry might suggest that consumer staples companies are also to be included in the larger group of constituents that are consumer stocks.
When selecting consumer stocks to buy and sell, using the holdings of popular ETFs is a good way to develop investable ideas. The Consumer Discretionary Select Sector SPDR Fund (NYSEARCA:XLY) and Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP) are two appropriate examples.
They represent the consumer discretionary and consumer staples stocks within the S&P 500. XLY has 52 holdings while XLP has 38. I’ve selected at least one name from each sector. While they’re both up more than 7% in 2024, they are trailing the index badly in 2024.
Word to the wise. If you’re smart, you’ll get your money out of these three stocks before the end of 2024.
Tyson Foods (TSN)
Tyson Foods (NYSE:TSN) share price is up nearly 7% year-to-date, less than half the return of the index. Given the actions of its suspended CFO John Tyson, I’m amazed it’s in positive territory at all.
On June 13, Tyson was arrested by the University of Arkansas police and charged with driving while intoxicated and careless driving after an officer witnessed the Tyson heir drive up on a curb. Tyson said he wasn’t drinking but ultimately said he had consumed up to seven beers. Unsurprisingly, his blood alcohol level was twice the 0.08 legal limit in Arkansas.
In November 2022, Tyson was arrested after falling asleep in a woman’s apartment in Fayetteville, Arkansas. He was charged with criminal trespassing and public intoxication.
It’s hard to imagine anyone keeping their job after two incidents of public intoxication but the CFO of a public company? That’s a red flag for investors in my opinion. CFRA Research analyst Arun Sundaram seemed to agree. Reuters reported in June:
‘At some point, the board will need to decide when enough is enough,’ said Arun Sundaram, analyst with CFRA Research. ‘It’s difficult to imagine many other high-ranking executives retaining their positions after several legal incidents.’
There are good family-controlled businesses and there are bad ones. Tyson is a bad one.
Walgreens Boots Alliance (WBA)
By the time this is published, Walgreens Boots Alliance (NASDAQ:WBA) will have been removed from the Nasdaq 100 and replaced by Super Micro Computer (NASDAQ:SMCI), the manufacturer of high-performance servers, whose shares are up more than 175% in 2024.
This isn’t a surprise move by the index, given WBA stock has lost 58% of its value in 2024. To remain in the index, you must have a market capitalization of at least 0.1% of the total of all 100 companies. Right now, that works out to about 0.05%.
That’s the one shoe to drop. The other will be when it is escorted from the S&P 500. It hasn’t happened yet, but it will be soon enough.
Meanwhile, CEO Tim Wentworth told analysts in its Q3 2024 conference call that the drug store chain would close many of its stores as part of the company’s turnaround plan.
While store closures are a natural move to lower its operating costs, it might be enough to deliver profits for shareholders. It lost $13.1 billion through the third quarter.
Wentworth’s turnaround will take several quarters, if not years, to be successful.
Domino’s Pizza (DPZ)
Domino’s Pizza (NYSE:DPZ) is up over 2% YTD. That’s not great but compared to other publicly traded pizza chains — Papa John’s (NASDAQ:PZZA) has lost 46% YTD — it’s hanging in there.
Since former CEO Patrick Doyle announced he was stepping down in January 2018, DPZ stock has more than doubled (124%) in value. This proves that the CEOs who followed Doyle didn’t do a terrible job in the 6.5 years since Doyle’s announced departure.
However, in the eight years and three months Doyle was CEO, its shares appreciated by 2,159%, 17x the performance since.
They say you can’t go back. Domino’s has to push forward with the best plan possible to drive growth. Its plan included a significant international push. That appears to be in jeopardy.
On July 18, as part of its Q2 2024 results, it indicated that its goal to open 925 stores internationally would fall 225 (24%) short of that in 2024. One of its master franchisees, Domino’s Pizza Enterprises (DPE) had troubles opening and closing stores during the quarter.
During the conference call, its executives were asked if DPE was an isolated incident or if analysts could expect other international master franchisees to deliver fewer stores than planned over the second half of 2024. They didn’t really answer the question.
That’s a red flag.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
