Credit Suisse's Top 10 Consumer Discretionary Stocks: J M Smucker In, Mondelez Out


The Consumer Discretionary sector has been one of the market’s brightest sectors in 2015, and the Consumer Discretionary Select Sector SPDR ETF XLY has gained 5.7 percent versus the S&P 500’s 3.8 percent decline year-to-date. For the first time in two months, Credit Suisse analysts have updated their top Consumer Discretionary stock picks in 10 different subsectors.

Here’s a full list of the names they chose.

1. Apparel & Footwear: Hanesbrands Inc. HBI

Analyst Christian Buss sees the company as a “strong and steady cash flow generator” with the opportunity to grow earnings via acquisitions and a mix shift toward premium products.

2. Autos & Auto Parts: Magna International Inc MGA

Analyst Dan Galves believes the company will be “a key beneficiary of increasing vehicle globalization” and is confident that it can meet its 2017 revenue and margin targets.

3. Gaming & Lodging: Six Flags Entertainment Corp SIX

Analyst Joel Simkins predicts that the company will be able to capitalize on its pricing power in coming years, and he also likes the robust 4.5 percent dividend.

4. Homebuilding & Building Products: Mohawk Industries MHK

Analyst Mike Dahl sees continuing improvements to operating margins due to pricing power, cost controls and tailwinds from low oil prices.

5. Media, Cable & Satellite: Time Warner Inc TWX

Analyst Omar Sheikh explains that “if we were to strip out HBO at valuations of $30bn-$35bn, the rest of Time Warner is currently trading at 14x-16x 2016 PE, a material discount to Disney and Fox at ~18-19x.”

6. Packaged Food: J M Smucker Co SJM

Analyst Rob Moskow thinks that if management handles overhead expenses, the company can boost EPS to $7.61 and share price to $152 by 2018. Smucker replaces Mondelez International Inc MDLZ as the only new Consumer Discretionary stock on Credit Suisse’s list.

7. Retail, Broadlines & Department Stores: Costco Wholesale Corporation COST

Analyst Michael Extein calls the company “one of the few conventional retailers that continues to deliver positive traffic, market share gains, and a validated model for international expansion.”

8. Retail, Food & Drug: Dollar General Corporation DG

Analyst Ed Kelly likes the company’s strong comparable store sales growth, accelerating square footage growth, improving margin outlook and aggressive share repurchase strategy.

9. Retail, Hardlines: Home Depot Inc HD

Analyst Seth Sigman views the company as “a best-in-class retailer with a strong management team that participates in one of the strongest segments of retail.”

10. Restaurants: Dunkin Brands Group Inc DNKN

Analyst Jason West sees strong demand for westward expansion, which he believes is "the key to the DNKN story."

Disclosure: the author holds no position in the stocks mentioned.

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Posted In: Analyst ColorLong IdeasAnalyst RatingsTrading IdeasChristian BussCredit SuisseJoel SimkinsMike DahlRob Moskow
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