Consumer stocks, particularly those levered to staples or durable goods, offer tremendous appeal during uncertain times. In other cases, companies within the sector that have a more cyclical nature can advantage hot streaks in the markets. Invariably, though, it pays to cash out while the going is good.
Indeed, some indicators suggest that trimming exposure to recently labeled hot stocks is a wise move. For one thing, the broader markets have had trouble sustaining earlier momentum. As an example, the Dow Jones Industrial Average gained more than 8% in January. But so far this month, the index increased by only 2%, well off-pace.
Another factor to consider when determining the best course of action for consumer stocks is consumer sentiment . During the last government shutdown, Americans' expectations regarding the economy took a dive. And while a solution to the issue appears on the horizon, it may take time for affected workers to recover.
Even if Washington steadies the boat, the country nears a crisis point. Despite the current administration's many promises to the contrary, the national debt spiked to $22 trillion. Current fiscal and tax-related policies, if they remain in place, could worsen the situation. This might play into consumer stocks longer-term.
Of course, you still want exposure to a basket of steady, reliable names in your portfolio. But simultaneously, now is an ideal time to consider profiting from a few hot stocks.
Here are five consumer investments to cash out of:Source: Shutterstock
Estee Lauder (EL)
Among consumer stocks, cosmetics companies like Estee Lauder (NYSE: EL ) indirectly offer both discretionary and staples exposure. While beauty products are inherently luxury items, various sociological studies indicate that beauty has an economic value . As a result, EL stock offers viability, even in difficult markets.
But thanks to its recent surge, shares are now up 19.5% on a year-to-date basis. Certainly, a justification exists for why EL stock trades at a premium. Most notably, the cosmetics firm handily beat consensus estimates for earnings-per-share during its second-quarter 2019 report.
However, hot stocks can sometimes get a little too toasty. For all its fundamental strengths, Estee Lauder shares have turned incredibly choppy over the past year. It has also incurred difficulty maintaining its bullish streaks. If you got in early, you may want to strike while the iron is hot.Source: slgckgc via Flickr (Modified)
Church & Dwight (CHD)
I'll freely admit that as an investor, I tend to lean toward the spicier end of the scale. That said, when you face uncertainty in the benchmark indices, it pays to buy boring consumer stocks. Within this category, I don't think you can get any more boring than Church & Dwight (NYSE: CHD ).
By no means am I trashing CHD stock. Over the past several years, Church & Dwight has navigated tough market conditions for safety-seeking shareholders. The company's core of essential goods, such as Arm & Hammer and Oxi Clean, ensure relevancy longer-term. Plus, CHD features rising revenues and a history of positive earnings.
On the flipside, an investment can get too boring. At least partially, this is what plagues CHD stock currently. Since peaking near mid-December of last year, shares have had trouble moving the needle. Again, if you got in earlier, you may want to take some off the table.Source: Shutterstock
Ollie's Bargain Outlet (OLLI)
During the tumultuous years following the Great Recession, several consumer stocks had an unfortunately recurring problem: convincing consumers to consume. But within this malaise, Ollie's Bargain Outlet (NASDAQ: OLLI ) went decisively against the grain. Over the last three-and-a-half years, OLLI stock jumped well over 330%.
What's the secret to their runaway success? I wrote in the summer of 2017 that Ollie's operated on a " keep-it-simple " strategy. Unlike dollar stores, the discounter retailer focuses on brand-name goods. Essentially, they sell quality products at low prices: it's really hard to screw this strategy up!
Indeed, I felt that OLLI stock could weather market storms far better than its peers. Despite some scary moments, I was proven correct on a net basis. At the same time, I don't want to push my luck. Because OLLI doesn't pay a dividend, it relies purely on capital gains.
At this juncture, I'd probably cash out, and wait for a reset.Source: Mike Mozart via Flickr (Modified)
Five Below (FIVE)
If you didn't know any better, you might think that Five Below (NASDAQ: FIVE ) references cold-weather attire. It doesn't. In fact, FIVE stock is one of the hottest among recently celebrated hot stocks. Not to belabor the reference, but over the trailing five-year period, shares have gained a whopping 259%.
Like Ollie's, the retailer runs a very simple, but effective strategy: selling quality goods at attractive prices. But what separates FIVE stock from other discount stores is that they specifically cater to youth. Management also understands their audience . Leveraging social media, Five Below markets their products in a manner that's relevant and age-appropriate.
More importantly, the company's efforts have delivered impressive fiscal results. Given its 30% YTD performance, FIVE stock is still going strong. Nevertheless, it hasn't convincingly challenged upside resistance at $133. This might be a signal to cash out and wait for a better re-entry point.Source: Shutterstock
Canada Goose (GOOS)
Thanks to the record-breaking cold weather that has recently impacted several countries, Canada Goose 's (NYSE: GOOS ) profile skyrocketed. Renowned for their ultra-warm outerwear that both comfort and protect, Canada Goose is one of those consumer stocks that you'd think is a no-brainer.
But a cursory look at the one-year chart for GOOS stock tells a different story. Since early summer of last year, shares have gyrated wildly, but with a decidedly bearish tilt. Although the brand has multiple tailwinds - including positive engagement with Chinese customers despite the trade war - investors have shied away from its trouble spots.
For one thing, the company has driven up its expenses and overhead to feed its expansion efforts. Also, GOOS stock is liable to PR concerns. Primarily, animal-rights activists accuse the apparel maker for disturbing slaughtering practices . That, and the fact that GOOS doesn't pay a dividend may not sit well with prospective buyers.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.