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number cruncher

Sudip Ghosh is senior institutional account manager of global equity and market data sales at Morningstar Research Inc.

What are we looking for?

Inexpensive consumer-goods stocks that are strong performers. The S&P 500 Consumer Discretionary subindex was the best performing sector in the S&P 500 index last year. We are looking for stocks in that sector that meet the following criteria:

  • trailing price-earnings ratios below the industry median;
  • positive analyst estimate revisions over the past three months;
  • positive quarterly earnings momentum when compared against the industry median;
  • positive, normalized earnings growth on a three-year basis;
  • market cap greater than $500-million.

We sorted the list by the rate of return over the last 12 months.

What we found

One of the more interesting things to note is that out of the 14 stocks on the screen, half are auto-related. It appears as though auto stocks are exhibiting some strength based on these screen parameters.

This makes sense, as most economists are calling for solid economic growth in the United States, which should bode well for all consumer discretionary stocks. There already have been big gains in the housing-related stock space, and if the consumer sector in the U.S. remains strong, it is logical that auto sales should also be robust. It also makes sense that home builder D.R. Horton Inc. is on the list.

Another interesting name on the list is Iconix Brand Group Inc., a company that licences and sells consumer brands such as Fieldcrest and Joe Boxer and owns a majority stake in the Buffalo David Bitton clothing brand. This stock is rated 10 out of 10 by Thomson Reuters' StockReports+ service. The analyst consensus price target for its shares over the next year is $39.84 (U.S.), with most analysts rating it "hold."

Entertainment company Viacom Inc. also makes the list. Most of the 37 analysts covering this stock rate it a "buy," according to Thomson Reuters data.

Also featured is Finish Line Inc., a mall-based retailer of athletic shoes, apparel and accessories. Most of the 28 analysts covering it rate it "buy," with a consensus price target over the next year of $29.44.

As always, do your own research before making a decision on any of the stocks mentioned here.

Strong and cheap U.S. consumer-goods stocks