The 30 highest quant-ranked consumer discretionary stocks as Société Générale upgrades sector

Société Générale upgraded the consumer discretionary (NYSEARCA:XLY) and consumer staples (XLP) sectors.

This upgrade of the consumer discretionary (XLY) is the first in three years and is helped by lower mortgage rates, a steepening curve and weaker oil through 2025, said Manish Kabra, head of U.S. equity strategy, in a note.

“Equal-weighted consumer discretionary (RSPD) is at cycle lows on relative performance, a perfect environment for stock-pickers,” said Kabra.

He added that corporate leverage is at its lowest in five years, households are at their lowest in 25 years, and the U.S. government debt is at its highest since World War II. Credit lending indicators, on the other hand, are in the early stages of improvement.

So, as U.S. consumer stocks reached cycle lows on relative performance, there is now an opportunity for better performance as mortgage rates are falling, and consumer cyclicals usually outperform as mortgage rates drop.

In addition, the supply-demand “mismatch” will keep oil prices (CL1:COM) in check throughout 2025, said Kabra. “We could see US$50 in a downside-risk scenario.”

“While uncertainty on job growth may persist until the yield curve shifts from bull steepening to bear steepening, consumer discretionary (XLY) is the only sector that outperforms in both phases,” he added.

These are the top consumer discretionary stocks, ranked by Seeking Alpha quant ratings:

• Carnival Corp. (CCL) – Quant rating: 4.94
• General Motors Co. (GM) – Quant rating: 4.93
• Rush Street Interactive Inc. (RSI) – Quant rating: 4.90
• Royal Caribbean Cruises Ltd. (RCL) – Quant rating: 4.86
• Meritage Home Corp. (MTH) – Quant rating: 4.83
• Carival Corporation & Plc (CUK) – Quant rating: 4.83
• M/I Homes Inc. (MHO) – Quant rating: 4.82
• Frontdoor Inc. (FTDR) – Quant rating: 4.78
• The Gap Inc. (GAP) – Quant rating: 4.76
• El Pollo Loco Holdings Inc. (LOCO) – Quant rating: 4.75
• PulteGroup Inc. (PHM) – Quant rating: 4.73
• Build-A-Bear Workshop Inc. (BBW) – Quant rating: 4.71
• D.R. Horton Inc. (DHI) – Quant rating: 4.69
• Dorman Products Inc. (DORM) – Quant rating: 4.63
• Grand Canyon Education Inc. (LOPE) – Quant rating: 4.53
• Norwegian Cruise Line Holdings Ltd. (NCLH) – Quant rating: 4.52
• Sweetgreen Inc. (SG) – Quant rating: 4.40
• TriPointe Homes Inc. (TPH) – Quant rating: 4.30
• Legacy Housing Corp. (LEGH) – Quant rating: 4.16
• YETI Holdings Inc. (YETI) – Quant rating: 4.11
• Expedia Group Inc. (EXPE) – Quant rating: 4.04
• PVH Corp. (PVH) – Quant rating: 3.96
• Universal Technical Institute Inc. (UTI) – Quant rating: 3.96
• DoorDash Inc. (DASH) – Quant rating: 3.94
• Adtalem Global Education Inc. (ATGE) – Quant rating: 3.89
• AutoZone Inc. (AZO) – Quant rating: 3.76
• Stride Inc. (LRN) – Quant rating: 3.76
• Dream Finders Home Inc. (DFH) – Quant rating: 3.71
• Upbound Group Inc. (UPBD) – Quant rating: 3.68
• American Eagle Outfitters Inc. (AEO) – Quant rating: 3.57