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Will This S&P-Leading Industry Keep Soaring in 2014?

Investors in the S&P 500 (SNPINDEX: ^GSPC  ) have been quite happy with the index's performance in 2013, with gains of more than 25% on a total-return basis coming in a broad-based rally that has included just about every sector of the market. But among all those winners, the consumer discretionary has truly led the pack, with the latest figures from Yardeni Research [opens PDF] showing the sector up more than 35% in 2013. Let's take a look at the move and how standouts Las Vegas Sands (NYSE: LVS  ) , Wynn Resorts (NASDAQ: WYNN  ) , Gannett (NYSE: GCI  ) , and Whirlpool (NYSE: WHR  ) helped contribute to it.

^SPX Chart

Consumer Discretionary year-to-date return data by YCharts.

Winners and losers in consumer discretionary stocks
Even though consumer discretionary stocks did well overall, there were still major pockets of underlying strength and weakness in the sector. Homebuilder stocks did abominably, as investors worried about the impact of rising rates on the housing market. The restaurant industry also underperformed the sector overall, with heavy competition weighing on various companies.

But several subsectors really stood out. Casinos and gaming had a broad-based move higher, with Las Vegas Sands and Wynn Resorts both climbing 69% year-to-date. Both companies have had substantial success boosting their presence in the Asian gaming capital of Macau, with Sands having the competitive advantage of having a presence on the newer Cotai Strip that Wynn lacks. But with Wynn Cotai scheduled to open in early 2016, Sands can expect even further competition in Macau. Still, win-rates continue to hold up well even in light of less-than-stellar economic conditions, and opportunities elsewhere suggest that further gains for the casino giants could well continue.

Publishing climbed more than 50%, in an about-face from terrible conditions in past years in which many predicted the death of conventional publishing. Gannett matched the subsector's returns with a 51% gain, with the publisher of USA Today making a major move into broadcast television earlier this year by acquiring Belo in a $1.5 billion transaction. Combined with Jeff Bezos' acquisition of The Washington Post, value investors have taken a shine to the prospects for transformation of the industry.

Household appliance companies also did well, posting a 46% rise. Whirlpool's 49% jump was representative of the industry, with a rebound in home prices and home-buying activity leading to more demand for the furnishings to fill those homes. In its most recent earnings report, Whirlpool boosted its earnings and free cash flow guidance for the second quarter in a row, with accelerating growth in the key North American region offsetting sluggishness elsewhere around the world. If the world economy takes off, then Whirlpool could pick up even bigger gains.

What to watch for in 2014
Consumer discretionary stocks have the potential to climb further as long as the U.S. economy remains on sound footing. If China and other emerging markets perk up and Europe emerges from recession, it could provide an added bonus for these companies going forward.

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Related Tickers

9/29/2016 4:35 PM
^GSPC $2151.13 Down -20.24 -0.93%
S&P 500 INDEX CAPS Rating: No stars
GCI $11.60 Down -0.28 -2.36%
Gannett CAPS Rating: No stars
LVS $56.93 Down -0.55 -0.96%
Las Vegas Sands CAPS Rating: ****
WHR $160.35 Down -1.94 -1.20%
Whirlpool CAPS Rating: ****
WYNN $100.59 Down -1.07 -1.05%
Wynn Resorts CAPS Rating: ****