Consumer Discretionary Stocks in Canada
Consumer stocks offer products and services that people like to live with. Companies in the consumer goods sector sell goods and services considered indispensable, such as household appliances, cars and entertainment. Unlike staple food companies, which are necessities, consumer-goods stocks tend to perform better when the economy is strong than when times are tough.
The term “staple food” suggests that staple food companies have a steady demand for their products and are less sensitive to changes in the business cycle. Cyclical consumer sectors tend to perform better during an economic expansion, so they are good to find stocks during a recovery. The Canadian industrial sector is a good place to look for companies that investors do not own.
Today, let’s look at a strategy that combines Canada’s cyclical consumer sector with industry to see if we can find companies that can diversify their portfolios while generating additional returns. This article examines the cyclical consumer sector, defines what it is doing to increase the return on your portfolio, and provides you with a full list of dividend stocks with comprehensive metrics. If you liked the Consumer Cyclical Dividend Stocks list and are looking for additional sectors, you can sign up for our free newsletter to get exclusive access to the stocks and sectors listed below.
Use the chart below to see how the Consumer Discretionary Select Sector SPDR ETF (XLY: US) has performed over three months, years and five years.
Consumer staples include producers and distributors of food, beverages and tobacco, and producers of non-durable household items and personal products. This includes food and drug companies as well as supermarkets. Consumer discretionary stocks include domestic and international companies that manufacture all kinds of non-essential and luxury goods.
Ozon Holdings PLC offers products in various categories, including electronics, household and Da-Cor products, children’s products, fast-moving consumer goods, fresh food and auto parts. Business and Consumer Business and Business Plus. The company sells its products through various channels, including traditional websites and direct apps downloads, to enable consumers to discover digital platforms such as the Apple App Store and Google Play Store.
119.6 billion, $15.13) Canadian Tire Corporation Limited offers a full range of retail products and services in Canada. The direct-to-consumer segment includes retail stores and e-commerce websites.
The business includes products and services that consumers want but do not need. The Services segment consists of hotels, restaurants, leisure facilities, media production services and retail properties. The Representation segment offers Brand Strategy, Marketing, Advertising, Public Relations, Analytics, Digital activation and experience services to businesses and other customers, Intellectual Property License Services, Portfolio Entertainment, Sports, Consumer Goods and Brands, Content Development, Production, Finance, Distribution and Consulting, Television properties, documentaries, feature films and podcasts.
These sectors tend to thrive in bloated economies because they are driven by consumer spending. Businesses depend on business investment because consumer demand can be minuscule. The term “discretionary” suggests that these companies produce products that consumers choose and do not necessarily buy the products they need.
A great strategy is to identify companies in the cyclical industrial and consumer sectors comfortable with high volatility. Industrial companies include Air Canada, Boyd Group Income Fund, CAE Inc., Canadian National Railway Co., Finning International Inc., and technologies such as BMO, CGI Group Inc., Kinaxis Inc. and Open Text Corp. Consumer cyclical companies are also the most frequent dividend payers in the group.
You can invest in discretionary consumer ETFs in Canada. Still, if you are looking for other options, you can also explore ETFs traded on exchanges in other countries (e.g. NYSE US).
Much of the recent success of NKEs has been a conscious decision to run a business directly to the consumer (DTC) and connect directly with end customers.
Disney is a household name in family entertainment with several competitive strengths, including an unrivalled intellectual property stash and a flywheel business model that allows successful films such as Frozen to be spun off into multiple businesses such as theme parks rides, toys, consumer goods and live entertainment. Nike has established a dominant position in sports footwear and sportswear for more than a century through innovations that have made sports equipment available to a broad audience.
After Starbucks introduced the European café concept to the American masses, the coffee company tapped into consumer’s “urge to indulge in a little luxury, and its premium beverages have a loyal following worldwide. As industrial production slowed, consumer expectations began to fall. When consumer expectations were low, they began to improve.
In this scenario, strategists highlight the outperformance of commodity stocks and the underperformance of consumer-related stocks. This is exactly what has happened to consumer-cyclical stocks in the so-called consumer discretionary sector as if they were riding a light wave and enjoying the sun. For example, over the last 10 years (approximately the time Eddie Lampert sold his AZO shares), the AutoZone stock (AZO, $123.25) has delivered an annualized return of 18.8% above the broader US market, even though it accounts for less than half of the automotive and other aftermarket auto suppliers listed as consumer goods stocks.