Consumer Discretionary Sector: Sterling Picks for 2022

With 2022 in full swing, it stands to reason that since the pandemic is not as burdensome as it once was, consumer discretionary spending will rise. After all, non-essential products and services will be in vogue again, right? (Shall we go beyond just toilet paper?)

The discretionary segment of the consumer benefits when people feel more free to spend money or feel they have more money to spend. So, what kinds of products and companies bode well in 2022 and how do you invest?

Let’s find out.

What is the discretionary consumer sector?

First of all, what is the discretionary segment of the consumer? The consumer discretionary segment consists of companies that sell products and services that are “non-essential” – those that consumers do not Owns to buy. They differ from basic consumer goods – this sector includes products like food, drinks and yes, toilet paper – things that consumers tend to buy no matter how well or poorly the economy is doing.

Here’s an example: You don’t really need diamond earrings or brand-new cars – you can probably match up with your old gold studs or your used car if you absolutely need to.

What makes the discretionary consumer sector?

Within the discretionary sector of the consumer, there are various groups of firms whose demand can fall rapidly when consumers do not need them. Here is a quick list of industries covered by the sector: Automotive, Distributor industry, Diversified Consumer Services, Hotels and Restaurants, Household Durables, Internet, Retail, Leisure Products, Media, Retail and Luxury Goods (including Apparel). Let’s look at a slice of the options within the sector, as well as a stock or two to consider for your own portfolio.

Auto industry

The automobile industry, a highly cyclical industry, includes the design, manufacture, repair and maintenance of automobiles. What does it mean? You’ve got it – profit margins with high volatility, not to mention cost variance even due to raw materials like copper and steel.

Ambarella Inc. (NASDAQ: AMBA)

Ambarella Inc. Headquartered in Santa Clara, California, it develops and sells video compression, image processing, and computer vision solutions. The company creates and sells computer hardware and software geared toward security cameras, car cameras, industrial, robotic, and consumer applications. You will find Ambarella applications in the format Tesla (NASDAQ: TSLA) Autonomous driving system. Ambarella showed a gain in the third quarter of fiscal 2021 of $92.2 million, up 64% from $56.1 million in the same period in fiscal 2020.

Hotels and restaurants

When it comes to hotels and restaurants, you can bet that this is one of the first things to get rid of when the economy slows down. While it’s true that hotel operators have long been prepared for a slow and steady recovery after COVID-19 that will likely last longer than the Great Recession, you can still find some rough diamonds, especially with some corrections heading down the pipeline. .

The ONE Group Hospitality Inc. (NASDAQ:STKS)

The ONE Group Hospitality Inc. , based in Denver, Colorado, develops, owns and operates restaurants and lounges such as STK, Kona Grill, and ONE Hospitality. The company operates other brands and venue concepts such as ANGEL, Bagatelle, Heliot, Hideout, Marconi and Radio.

Financial achievements for the third quarter over the same period last year included an 81.6% increase in GAAP revenue to $71.9 million from $39.6 million, and GAAP net income of $11.7 million or $0.34 net income per share, compared to a net loss of 0.9 million. US dollars in 2020.

home perennial

At first glance, it may not be clear what a home’s durables are. Think of these as products that are purchased infrequently, such as lawn care equipment, furniture, appliances, and other types of products that might go by the wayside during a bear market.

Purple Innovation (NASDAQ: PRPL)

Purple Innovation Inc. Headquartered in Lehi, Utah, designs and manufactures comfort technology products such as mattresses, bed pillows, seat cushions, mattress protectors, and bamboo covers.

The manufacturing backlog slowed Purple production, which saw net revenue down 8.7% to $170.8 million over 2020 and up 45.5% over 2019. Wholesale revenue was up 9.6% over 2020 and 17.1% over 2019 Revenue declined Direct-to-consumer rate of 15.9%. Gross profit was 35.8% compared to 47.2% in 2020 and 45.0% in 2019. However, the company will rise to 270 new retail doors and increase its presence.

Internet and retail catalog

Naturally, this section of consumer appreciation has grown as the internet has boomed during the pandemic. This includes mail order, door-to-door retailers, TV home shopping retailers, and Internet service companies. These companies do not offer physical locations.

Booking Holdings Inc. (NASDAQ: BKNG)

Booking Holdings Inc. Online travel and restaurant reservations and related services. Connects consumers with travel providers around the world, including hotels, B&Bs, hostels, apartments, vacation rentals and other properties through Booking.com, priceline.com, agoda.com, KAYAK, Rentalcars.com and OpenTable Inc.

Booking Holdings’ total revenue for the third quarter of 2021 was $4.7 billion, an increase of 77% over the previous quarter. Net income was $769 million, down 4% from the previous quarter. Non-GAAP net income was $1.6 billion in the third quarter of 2021.

Entertainment Products

Recreational products refer to different types of recreational activities – sports, outdoor activities (such as camping equipment) and children’s toys, for example.

Winnebago (NYSE: WGO)

Winnebago Industries Inc. Headquartered in Forest City, Iowa, it designs, develops, and sells leisure products, including Grand Design, Winnebago Homes, Newmar Express Homes, Chris Craft Marine, and Winnebago Specialty Vehicles.

Revenues for the first quarter of fiscal year 2022 at the end of November reached a record high of $1.2 billion, an increase of 45.7 percent compared to $793.1 million for the fiscal period 2021. This represents an organic growth rate of 37.5% compared to the same period last year due to strong consumer demand and price increases related to material costs.

Are you ready to pursue the optional consumer segment?

While you may have to choose with the right consumer discretionary stocks for your portfolio, it’s worth considering this sector for buys and ups in 2022.

.

Leave a Comment