Performance Review Of Key S&P 500 Consumer Discretionary Sector Members

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Includes: AMZN, CMCSA, DIS, F, HD, MCD, NWSA, TGT, XLY
by: Zvi Bar

The consumer discretionary sector is composed of companies involved in manufacturing products and/or providing services that are not considered necessities. This sector includes industries such as media, restaurants, hotels, luxury goods and automobiles, among others.

Several of the industries included in the consumer discretionary sector are considered highly sensitive to business cycles, as the products and services are not necessary and consumers often choose to limit consumption of non-necessities during periods of economic weakness or uncertainty. Over the last few years, growth within the consumer discretionary sector has primarily occurred through growing international sales and a recovery and expansion within domestic media advertising.
This is a review of the most heavily weighted companies within the consumer discretionary sector of the S&P 500 (NYSEARCA:SPY). I have included those components that have over a 3% weighting/allocation within the sector. The resulting 8 companies make up over 35% of the total weighting of the sector. I have provided their present yields and sector weighting, as well as their 1-month, 3-month and 2011-to-date performance rates.
McDonald’s Corp (NYSE:MCD): McDonald’s operates 'fast-food' restaurants in the food service industry in more than 100 countries around the world.
  • Yield: 2.8%
  • Sector Weight: 7.65%
  • 1-month: 0.90%
  • 3-month: 6.99%
  • 2011-to-date: 15.01%
Amazon.com Inc (NASDAQ:AMZN): Amazon.com is the world's largest online-only retailer.
  • Yield: 0% - N/A
  • Sector Weight: 7.14%
  • 1-month: 22.14%
  • 3-month: 28.39%
  • 2011-to-date: 28.75%
Comcast Corp (NASDAQ:CMCSA): Comcast is a leading provider of video, high-speed Internet and phone services within the United States.
  • Yield: 2%
  • Sector Weight: 5.3%
  • 1-month: 7.54%
  • 3-month: -3%
  • 2011-to-date: 0.8%
Walt Disney Co (NYSE:DIS): Disney is a diversified worldwide entertainment company with operations in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive Media.
  • Yield: 1.2%
  • Sector Weight: 5.2%
  • 1-month: -1.37%
  • 3-month: -13.49%
  • 2011-to-date: -12.25
Home Depot Inc (NYSE:HD): Home Depotis the world’s largest home improvement retailer based on net sales.
  • Yield: 2.9%
  • Sector Weight: 4.6%
  • 1-month: 3.58%
  • 3-month: 0.23%
  • 2011-to-date: -1.28%
Ford Motor Co (NYSE:F): Ford is one of the world’s largest producers of cars and trucks, and also engages in financing vehicles.
  • Yield: 0% - N/A
  • Sector Weight: 3.37%
  • 1-month: -4.41%
  • 3-month: -16.83%
  • 2011-to-date: -36.75%
News Corp (NASDAQ:NWSA): News Corp is a diversified global media company with operations in the following eight industry segments: (i) Filmed Entertainment; (ii) Television; (iii) Cable Network Programming; (iv) Direct Broadcast Satellite Television; (v) Magazines and Inserts; (vi) Newspapers and Information Services; (vii) Book Publishing; and (viii) Other.
  • Yield: 1.1%
  • Sector Weight: 3.24%
  • 1-month: -0.41%
  • 3-month: 5.67%
  • 2011-to-date: 16.48%
Target Corp (NYSE:TGT): Target operates one of the largest retailers in the United States, and also runs a Credit Card segment that is branded to its retail stores.
  • Yield: 2.3%
  • Sector Weight: 3.03%
  • 1-month: 4.16%
  • 3-month: 13.16%
  • 2011-to-date: -12.41%
Opinions are likely to differ on exactly what a necessity is, or how discretionary a consumer has to be before consuming goods and/or services from the above-mentioned companies. For example, retailers such as Amazon.com and Target generally offer consumers competitive prices on a wide spectrum of products that run the gamut from true essentials to leisure & luxury goods. Such retailers may be better categorized as consumer staples, but they are not currently inlcuded in that S&P 500 sector. Additionally, American consumers are relatively resistant to eliminating their cable television services.

Among the retailers, the present strength and growth of Amazon.com and other internet-based retailers may be part of a zero-sum game for the broader retail industry, where their growth is likely associated with cannibalization of market share from competing traditional retailers.

The consumer discretionary sector currently accounts for approximately 10.8% of the total S&P 500. The 78 companies that make up this portion of the S&P 500 can also be tracked via the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY), as well as several other tracking funds.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This article is intended to be informative and should not be construed as personalized advice, as it does not take into account your specific situation or objectives.