3 Consumer Stocks That Concern Us

Most consumer discretionary businesses succeed or fail based on the broader economy. Unfortunately, the industry’s recent performance suggests demand may be slowing as discretionary stocks’ 3.7% return over the past six months has trailed the S&P 500 by 2.5 percentage points.

Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. Taking that into account, here are three consumer stocks we’re passing on.

Marriott Vacations (VAC)

Market Cap: $3.19 billion

Spun off from Marriott International in 1984, Marriott Vacations (NYSE:VAC) is a vacation company providing leisure experiences for travelers around the world.

Why Do We Think VAC Will Underperform?

1. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
2. High net-debt-to-EBITDA ratio of 11× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $98.69 per share, Marriott Vacations trades at 12.7x forward P/E. Read our free research report to see why you should think twice about including VAC in your portfolio.

Callaway Golf Company (CALY)

Market Cap: $3.02 billion

Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE:CALY) sells golf equipment and operates technology-driven golf entertainment venues.

Why Should You Sell CALY?

1. Muted 3.3% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. ROIC hasn’t moved, making investors question whether its recent investments can increase profitability

Callaway Golf Company’s stock price of $18.31 implies a valuation ratio of 25x forward P/E. Check out our free in-depth research report to learn more about why CALY doesn’t pass our bar.

AT&T (T)

Market Cap: $159.8 billion

Founded by Alexander Graham Bell, AT&T (NYSE:T) is a multinational telecomm conglomerate providing a range of communications and internet services.

Why Should You Dump T?

1. Products and services have few die-hard fans as sales have declined by 1.3% annually over the last five years
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 7.5% annually, worse than its revenue
3. Free cash flow margin is projected to show no improvement next year

AT&T is trading at $22.43 per share, or 9.5x forward P/E. If you’re considering T for your portfolio, see our FREE research report to learn more.

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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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.