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

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 11.5 percent versus the S&P 500’s 0.7 percent gain 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 4.3 percent dividend.

4. Homebuilding & Building Products: Caesarstone Sdot-Yam Ltd CSTE
Analyst Mike Dahl sees “significant revenue and EBITDA growth over the next several years” and likes the company’s U.S. manufacturing capacity expansion and growing brand recognition. Caesarstone replaces Mohawk Industries MHK as the firm’s new top pick in the space.

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 significant discounts to Disney and Fox.”

6. Packaged Food: Kellogg Company K
Analyst Rob Moskow thinks “there is plenty of runway for positive ratings revisions” and believes the stock represents the best risk/reward balance among its peers. Kellogg replaces J M Smucker Co SJM as the firm’s new top pick in the space.

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: McDonalds Corporation MCD
Analyst Jason West believes that CEO Steve Easterbrook’s turnaround effort is starting to pay off and sees “room for upside on SSS momentum, SG&A savings and incremental leveraged buybacks.” McDonalds replaces Dunkin Brands Group Inc DNKN as the firm’s new top pick in the space.
 

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