It's been a terrible few months for investors in Australia's consumer discretionary sector. The sector, which contains companies that provide products or services that aren't 'necessities', has suffered as a result of poor consumer sentiment and spending in the six months to June 30.
Some analysts and companies have blamed the weather, others the government and budget, and some may well have blamed flying pigs, but investors should take note because these once-off conditions may provide us with some buying opportunities.
SOLD OFF!
A number of companies in the clothing retailing and budget sectors have announced profit downgrades that have pulled down the entire sector. The S&P/ASX 200 Consumer Discretionary Index (ASX:^XDJ) has underperformed the S&P/ASX 200 by nearly 4% so far in 2014, despite many of the best stocks still performing well.
3 TOP STOCKS
Flight Centre Travel Group Ltd (ASX: FLT) has plunged 18% since March 10 when it hit a high of $55.72. Earnings are expected to grow by between 8% and 11% this financial year and free cash flow should certainly allow an increase in dividend payout. Companies of Flight Centre's quality and growth prospects rarely look cheap, but the recent pullback may well be the best opportunity for some time.
JB Hi-Fi Limited (ASX: JBH) is now trading 15% below its 2014 high of $22.28 reached in January this year. Investors were apparently spooked by the strong price rise towards the end of 2013 and failed to jump back in when the group announced some impressive half-year results in February. More recently, JB Hi-Fi reiterated guidance for the financial year and is poised outperform when it announces results in August.
Finally, Dick Smith Holdings Ltd (ASX: DSH) has been a bit of a surprise package to myself and others, I'm sure. The company operates in the same area as JB Hi-Fi but has advised that it will deliver a good profit of $40 million in 2014 on decent like-for-like sales growth and impressive margins. The stock is down 8% this year and 13% since listing but could well see a big jump when it reports earnings later this year.
