The stocks of some of America's most famous household brands are down enormously this year. But, could now be the right time to get in?
Out of all the sectors in the S&P 500, the consumer discretionary sector is the only one that's down this year. As a whole, the group is down 3.6 percent so far this year. Among its 51 losers are Best Buy, Staples, Amazon, Starbucks, Home Depotand CBS. However, 34 of the sector's stocks are on the plus side, including Disney, McDonald's, Fordand Netflix.
According to one portfolio manager, now is the perfect time to buy into the sector and the ETF that tracks it, the Consumer Discretionary Select Sector SPDR (XLY).
"This is a classic case of buying straw hats in the winter," said Chad Morganlander, portfolio manager at Stifel's Washington Crossing Advisors. "Consumption patterns in the United States will start to gravitate higher."
Morganlander sees the economy returning to the upside after a flat first quarter.
"Over the course of the next three quarters, you're going to see a reemergence of GDP growth," said Morganlander, who forecasts a total GDP growth of 2.75 percent for 2014. "You're going to start to see jobs growth improve and, as a correlation, this asset class will move higher."
Steven Pytlar, chief equity strategy at Prime Execution, says his company recommended buying the consumer discretionary sector beginning last week. The sector "should be performing in line with the overall market," he said.
Despite the XLY being "beaten up" since the start of the year, it "is making a higher low," Pytlar said. "We've also seen a fair amount of volume come in on this higher low, which tells us that there is demand underneath the XLY."
In the near term, Pytlar is looking at the $64.75 level, which is 18 cents above Thursday's close. A break above that point could send the XLY back to its March highs of $67.85.
"What we're looking at in the very near term is this $64.75 level because that's where some minor selling pressure has been coming up," Pytlar said. "If we move through that, we do think that there's a good chance it could bounce all the way back up to the highs."
To see the full discussion on the XLY, with Morganlander on the fundamentals and Pytlar on the technicals, watch the above video.