Consumer discretionary businesses are levered to the highs and lows of economic cycles. Unfortunately, the industry’s recent performance suggests demand may be slowing as discretionary stocks’ 3.2% return over the past six months has trailed the S&P 500 by 4.9 percentage points.

Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. With that said, here are three consumer stocks best left ignored.

The New York Times (NYT)

Market Cap: $11.57 billion

Founded in 1851, The New York Times (NYSE: NYT) is an American media organization known for its influential newspaper and expansive digital journalism platforms.

Why Do We Avoid NYT?

1. Sluggish trends in its subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Poor expense management has led to an operating margin of 14.2% that is below the industry average
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $71.19 per share, The New York Times trades at 27.1x forward P/E. Check out our free in-depth research report to learn more about why NYT doesn’t pass our bar.

Hasbro (HAS)

Market Cap: $12.45 billion

Credited with the creation of toys such as Mr. Potato Head and the Rubik’s Cube, Hasbro (NASDAQ: HAS) is a global entertainment company offering a diverse range of toys, games, and multimedia experiences for children and families.

Why Is HAS Risky?

1. Products and services aren't resonating with the market as its revenue declined by 3.4% annually over the last five years
2. Earnings per share lagged its peers over the last five years as they only grew by 3.8% annually
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Hasbro is trading at $88.69 per share, or 17.2x forward P/E. Read our free research report to see why you should think twice about including HAS in your portfolio.

Harley-Davidson (HOG)

Market Cap: $2.45 billion

Founded in 1903, Harley-Davidson (NYSE: HOG) is an American motorcycle manufacturer known for its heavyweight motorcycles designed for cruising on highways.

Why Should You Dump HOG?

1. Performance surrounding its motorcycles sold has lagged its peers
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Harley-Davidson’s stock price of $20.81 implies a valuation ratio of 14.2x forward P/E. Dive into our free research report to see why there are better opportunities than HOG.

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