Why I'm Still Avoiding These Stocks

The following video is part of our "Motley Fool Conversations" series, in which consumer-goods editor and analyst Austin Smith discusses topics around the investing world. In today's edition, Austin discusses why he's still avoiding the consumer discretionary sector. Despite putting up impressive returns for shareholders over the past two years, recent weakness could be indicative of a long-term slide for these companies. Quintessential consumer discretionary stock Tiffany (NYSE: TIF  ) saw big losses on weakness from its flagship store. While that may seem isolated to just this company, 20 consumer discretionary stocks are projecting both sales growth and earnings decline this quarter. 

The likely reason is higher costs, but in an environment when cotton prices are declining -- a major input for many consumer discretionary stocks -- that just makes the guidance even more worrisome. Add in larger macroeconomic uncertainty and an ever more dramatic Europe -- where many consumer discretionary stocks have exposure -- and consumer-staples stocks are a better place for your dollar today.

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Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Aeropostale. Motley Fool newsletter services recommend Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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