The performance of consumer discretionary businesses is closely linked to economic cycles. This volatility leads to big swings in stock prices that have worked in their favor recently - over the past six months, the industry has returned 18.1% and beat the S&P 500 by 4 percentage points.
Although these companies have produced results lately, investors must be mindful because many are fads and only a few will stand the test of time. Taking that into account, here are three consumer stocks we’re swiping left on.
Hilton Grand Vacations (HGV)
Market Cap: $3.62 billion
Spun off from Hilton Worldwide in 2017, Hilton Grand Vacations (NYSE: HGV) is a global timeshare company that provides travel experiences for its customers through its timeshare resorts and club membership programs.
Why Is HGV Risky?
- Sluggish trends in its conducted tours suggest customers aren’t adopting its solutions as quickly as the company hoped
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 11× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Hilton Grand Vacations’s stock price of $42.36 implies a valuation ratio of 9.8x forward P/E. If you’re considering HGV for your portfolio, see our FREE research report to learn more.
Latham (SWIM)
Market Cap: $825.9 million
Started as a family business, Latham (NASDAQ: SWIM) is a global designer and manufacturer of in-ground residential swimming pools and related products.
Why Do We Think SWIM Will Underperform?
- Lackluster 8.9% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Subpar operating margin of 4.8% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Projected 1.7 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
Latham is trading at $7.08 per share, or 41.6x forward P/E. Check out our free in-depth research report to learn more about why SWIM doesn’t pass our bar.
The Real Brokerage (REAX)
Market Cap: $818.3 million
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ: REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.
Why Do We Avoid REAX?
- Persistent operating margin losses suggest the business manages its expenses poorly
- Earnings per share fell by 6.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
At $3.88 per share, The Real Brokerage trades at 11.5x forward EV-to-EBITDA. To fully understand why you should be careful with REAX, check out our full research report (it’s free for active Edge members).
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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