Consumer discretionary stocks on fire!
Consumer discretionary or cyclical stock is an equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies that sell discretionary items consumers can afford to buy more of in a booming economy and cut back on during a recession.
Amazon is the King of Consumer Discretionary
Amazon can be viewed as a barometer for discretionary spending. Sales and earnings are increasing at a time when the markets are at highs. This is when consumer discretionary (aka cyclical) stocks outperform; the populace feels good about the economy. When they feel good, they spend.
The only problem we have with AMZN is the PE = 289, while BABA, unquestionably looks better at 42. In addition, consider the recent “singles day” sales of 25.3 billion tallied in one 24 hour period.
If you think China will continue growing exponentially, as we do, BABA is the choice for the long term. Note price action bounced off of VBP support. (Look left).
Retail Got Crushed in 2017
With the holidays approaching, we are focused on this consumer-focused industry group. We think the potential winners next quarter might be retail-centric, considering the discount most retail stocks present. In addition, there are quite a few names in the group that looks promising.
The IBD50 list occasionally presents a retail stock for consideration and in this case, FIVE Below pops to the top of our “shopping list.” We also like TSLA SKX GM NKE DLTR AAPL, among others.
FIVE is quietly breaking out of a cup and handle pattern and earnings are scheduled for 11-30-2017. Perhaps a scalp or short term swing is in order.
Do a little homework this weekend and I’m sure you’ll find a few gems out there for your portfolio. We will do the same and present them you this weekend.
Look for the Sunday Video News Letter around 12:00 PM EST.