In this article, we shall explore the Consumer Discretionary sector. Particularly, we will look at the valuations of the top 10 holdings (based on index weight) of the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY). The ETF yields 1.8% compared to SPDR S&P 500 Trust ETF’s (NYSEARCA:SPY) 2.05%.
Year-to-date, the XLY has roughly tracked the SPY. Both have risen a few percentages.
Amazon.com, Inc. (NASDAQ:AMZN)
Amazon has appreciated 11.5% year-to-date, outperforming the XLY and SPY. Trading at a P/E of about 216, some investors wouldn’t touch it with a 10-foot pole.
That said, Amazon remains a strong disruptive force in retail, and its price follows its P/CFL much better than its P/E. If it continues that way, Amazon is likely to have more upside coming.
That said, Amazon is overbought in the near term. So, interested investors should try to see if they can buy it on dips to $630-$680 or lower.
Home Depot, Inc. (NYSE:HD)
Home Depot trades at about 23.3x earnings, but consensus analyst estimates its earnings per share [EPS] to grow at a rate of 14.6%, which supports a higher multiple. So, Home Depot can be viewed as fully-valued, rather than overvalued at the current level. I think a more concerning metric is its Debt/Cap of 76%.
Investors who really want to buy Home Depot shares should see if the shares will pull back about 9% to a P/E of 21 (at about $123 per share).
Walt Disney Company (NYSE:DIS)
Disney is reasonably valued at 17.5x earnings. Consensus analyst estimates its EPS to grow at a rate of 11.1%…
This is an excerpt of my Seeking Alpha article:
Have New Money To Invest? Which Sectors To Buy? Which To Avoid? Part 2
The valuations of other top Consumer Discretionary companies, including Comcast Corporation (NASDAQ:CMCSA), McDonald’s Corporation (NYSE:MCD), Starbucks Corporation (NASDAQ:SBUX), Nike Inc. (NYSE:NKE), Lowe’s Companies, Inc. (NYSE:LOW), and Time Warner Inc. (NYSE:TWX) are discussed in the Seeking Alpha article.
If you like what you've just read, consider subscribing via the "Subscribe Here" form at the top right so that you will receive an email notification when I publish a new article.Disclosure: At the time of writing, I own shares in NKE and SBUX.
Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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