10 Top Consumer Discretionary Stocks Of September 2024 (2024)

Whether they manufacture cars, design luxury goods or make fast food, consumer discretionary stocks profit from the full range of consumer goods and services. When you invest in consumer discretionary stocks, you’re buying companies that command strong brand loyalty among both their customers and investors.

To help you choose the best consumer discretionary stocks for your portfolio, Forbes Advisor has profiled the 10 largest in the industry by market capitalization.

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• Best Consumer Discretionary Stocks of September 2024
• Amazon.com Inc. (AMZN)
• Tesla Inc. (TSLA)
• LVMH Moet Hennessy Louis Vuitton SE (LVMHF)
• The Home Depot Inc. (HD)
• Toyota Motor Corp (TM)
• Hermes International SA (HESAY)
• PDD Holdings Inc. (PDD)
• McDonald’s Corp. (MCD)
• Nike Inc. (NKE)
• Booking Holdings Inc. (BKNG)
• Types of Consumer Discretionary Stocks
• Advantages of Investing in Consumer Discretionary Stocks
• Risks of Investing in Consumer Discretionary Stocks
• How To Buy Consumer Discretionary Stocks
• Next Up in Investing

*All data is sourced from StockRover, and is current as of June 5, 2024.

Like every stock market sector, the consumer discretionary sector is divided into a number of sub-industries. Four of the larger consumer discretionary sub-sectors include:

• Retailers. A important part of this sector are companies that sell goods, rather than make them themselves. This includes online marketplaces or brick-and-mortar stores.
• Automobiles and automobile components. Automakers and automotive component manufacturers comprise a sprawling, globalized industry.
• Household durable goods. These include products that are purchased infrequently and tend to last for years, such as home appliances, furniture and mattresses.
• Hotels, restaurants and leisure. These companies are involved in running hotels, resorts, casinos, restaurants and cruises.

It’s also worth noting that these categories don’t just include companies that are directly involved in the sub-sector but can also include companies that support their operations, such as those that specialize in marketing or advertising for consumer discretionary products.

They benefit from an expanding economy. When the economy is expanding, consumer discretionary stocks tend to see strong gains. They are what’s called cyclical stocks because they are directly dependent on economic cycles and consumer confidence. During good economic times, consumers are ready to spend on discretionary items.

Brand power. Consumer discretionary stocks benefit from the power of their brands. Strong brand names help these companies maintain dominant positions in their industries. Certain companies are also called “affinity stocks,” or companies that consumers want to invest in because they know and love their brands.

They suffer when the economy contracts. This is the flip side of being a cyclical sector: When economic growth slows or contracts, consumers hold back on making discretionary purchases, impacting the share values of companies in the sector.

Price-sensitive products. Unlike consumer staples stocks, which are companies that make products people need regardless of their preferences or economic well being, there is highly elastic demand for consumer discretionary goods. That means that more expensive goods are easily replaced by less expensive ones—or simply don’t need to be purchased at all.

Supply chain disruptions. Retailers and manufacturers of consumer discretionary goods are particularly exposed to problems from supply chain disruptions. Manufacturing of complicated durables and automobiles depend upon sprawling networks of suppliers, for instance, making them vulnerable to supply chain disruptions.

Inflation. Modest profit margins on goods and services in the consumer discretionary market make these stocks very sensitive to increasing inflation. Since consumers can choose not to purchase discretionary goods or substitute less expensive versions, companies that produce these goods become riskier as prices rise.

You can buy shares of consumer discretionary stocks in a taxable brokerage account or an individual retirement account (IRA)—a few 401(k) plans may also allow you to purchase individual stocks. If you’re just getting started in investing, or want to change up your platform of choice, check out our listings of the best online brokers and the best investment apps.

A word of caution: Investors need to understand that buying shares of individual companies isn’t like buying a well-diversified index fund. Stocks can be much riskier, making it imperative to research stocks and review their financial statements before investing.

Read More: How To Buy Stocks

Rather than buying the shares of individual companies, diversify your exposure to consumer discretionary stocks by choosing a sector exchange-traded fund (ETF) or index fund. The Consumer Discretionary Select Sector SPDR Fund (XLY), for instance, gives you exposure to the entire sector for a low expense ratio of only 0.12%.

The author(s) held no positions in the securities discussed in the post at the original time of publication.

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