(continued from front flap) $49.95 USA / $59.95 CAN Filled with in-depth insights and expert advice, Fisher Investments on Consumer Discretionary provides The Fisher Investments On series is designed to a framework for understanding this sector and provide individual investors, aspiring investment its industries to help you make better investment CONSUMER DISCRETIONARY on professionals, and students the tools necessary to decisions—now and in the future. With this book as understand and analyze investment opportunities— your guide, you can gain a global perspective of the primarily for investing in global stocks. Each guide is an Consumer Discretionary sector and discover strategies This installment of the Fisher Investments On series is a comprehensive guide to the Consumer on easily accessible primer to economic sectors, regions, to help achieve your investing goals. Discretionary industry—which includes companies such as auto manufacturers, homebuilders, CONSUMER or other components of the global stock market. sports equipment manufacturers, hotel developers and operators, cruise lines, retail websites, While this guide specifi cally focuses on Consumer and department stores, to name just a few. Discretionary, the basic investment methodology is applicable for analyzing any global sector, regardless This reliable guide can help you in making top-down investment decisions specifi cally for the ERIK RENAUD is a Consumer Discretionary Research DISCRETIONARY of the current macroeconomic environment. Consumer Discretionary sector. It shows how to determine better times to invest in Consumer Analyst at Fisher Investments. Renaud graduated from Discretionary, which Consumer Discretionary industries and sub-industries are likelier to do Santa Clara University with a bachelor’s degree in fi nance. Following a top-down approach to investing, Fisher best, and how individual stocks can benefi t in various environments. The global Consumer Hailing from Minnetonka, Minnesota, he currently resides Investments on Consumer Discretionary can help Discretionary sector is complex, covering many sub-industries and countries with unique in San Francisco, California. you make more informed decisions within the characteristics. Using the framework detailed in this book, you can learn to be better equipped Consumer Discretionary sector. It skillfully addresses to identify their differences, spot opportunities, and avoid major pitfalls. ANDREW S. TEUFEL has been with Fisher how to determine the optimal times to invest in Investments since 1995, where he currently serves as Consumer Discretionary stocks and which Consumer Given the vast market landscape and diverse geographic operations, it is vital to maintain o a Co-President and the Director of Research. Prior a global perspective when investing in the Consumer Discretionary sector. This invaluable n Discretionary industries and sub-industries have the to joining Fisher Investments, he worked at Bear resource provides the tools that can help you understand and analyze opportunities both in the C potential to perform well in various environments. Stearns as a corporate fi nance analyst in its Global O United States and abroad within this diverse sector. Technology Group. Teufel also instructs at many N S Divided into three comprehensive parts—Getting seminars and educational workshops throughout the U Started, Consumer Discretionary Details, and For more information, visit www.consumerdiscretionary.fi sherinvestments.com. United States and United Kingdom, and has lectured M Thinking Like a Portfolio Manager—Fisher (cid:129) An in-depth look at the global Consumer at the Haas School of Business at UC Berkeley. He is E Investments on Consumer Discretionary: R Discretionary universe, including automobiles, also the Editor in Chief of MarketMinder.com. Teufel About Fisher Investments Press (cid:129) Explains some of the sector’s key macro drivers—like D consumer durables and services, retailing, and media is a graduate of UC Berkeley. consumer spending, income, and employment I S Fisher Investments Press brings the research, analysis, and market intelligence of Fisher C (cid:129) Tips and tools for security analysis and (cid:129) Shows how to capitalize on a wide array of macro conditions Investments’ research team, headed by CEO and New York Times bestselling author Ken Fisher, R and industry-specifi c features to help you form an opinion E portfolio management on each of the industries within the sector to all investors. The Press covers a range of investing and market-related topics for a wide T Jacket Design: Leila Amiri I (cid:129) Takes you through the major components of the 12 sub- Jacket Images: © iStockphoto audience—from novices to enthusiasts to professionals. O (cid:129) A useful guide for investing in any market condition industries within the global Consumer Discretionary sector N and reveals how they operate A R (cid:129) Offers investment strategies to help you determine when Y and how to overweight specifi c industries within the sector (cid:129) Outlines a fi ve-step process to help differentiate fi rms in this fi eld—designed to help you identify ones with the greatest probability of outperforming Foreword by New York Times bestselling author Ken Fisher (continued on back flap) ISBN: 978-0-470-52703-0 ftoc.indd viiiftoc.indd viii 4/24/10 1:59:43 PM4/24/10 1:59:43 PM Fisher Investments on Consumer Discretionary ffirs.indd iffirs.indd i 4/24/10 1:57:12 PM4/24/10 1:57:12 PM FISHER INVESTMENTS PRESS Fisher Investments Press brings the research, analysis, and market intelligence of Fisher Investments’ research team, headed by CEO and New York Times best-selling author Ken Fisher, to all investors. The Press covers a range of investing and market-related topics for a wide audience—from novices to enthusiasts to professionals. Books by Ken Fisher How to Smell a Rat The Ten Roads to Riches The Only Three Questions That Count 100 Minds That Made the Market The Wall Street Waltz Super Stocks Fisher Investments Series Own the World by Aaron Anderson 20/20 Money by Michael Hanson Fisher Investments On Series Fisher Investments on Energy Fisher Investments on Materials Fisher Investments on Consumer Staples Fisher Investments on Industrials Fisher Investments on Emerging Markets Fisher Investments on Technology Fisher Investments on Consumer Discretionary ffirs.indd iiffirs.indd ii 4/24/10 1:57:13 PM4/24/10 1:57:13 PM Fisher Investments on Consumer Discretionary Fisher Investments with Erik Renaud and Andrew Teufel John Wiley & Sons, Inc. ffirs.indd iiiffirs.indd iii 4/24/10 1:57:13 PM4/24/10 1:57:13 PM Copyright © 2010 by Fisher Investments Press. All rights reserved. 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ISBN 978-0-470-52703-0 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 ffirs.indd ivffirs.indd iv 4/24/10 1:57:13 PM4/24/10 1:57:13 PM Contents Foreword ix Preface xi Acknowledgments xv Part I Getting Started in Consumer Discretionary 1 Chapter 1 Consumer Discretionary Basics 3 Consumer Discretionary 101 4 Getting to Know the Consumer Discretionary Sector 13 Chapter 2 The History of the Consumer Discretionary Sector 19 The Earliest American Consumers 20 The Birth of the Modern Consumer Discretionary Sector 23 Chapter 3 Consumer Discretionary Sector Drivers 35 Economic Drivers 36 Political Drivers 49 Sentiment Drivers 54 v ftoc.indd vftoc.indd v 4/24/10 1:59:42 PM4/24/10 1:59:42 PM vi Contents Part II Next Steps: Consumer Discretionary Details 57 Chapter 4 Consumer Discretionary Sector Landscape 59 Global Industry Classification Standard (GICS) 60 Global Consumer Discretionary Benchmarks 61 Automobiles & Components Industry Group 66 Retailing Industry Group 72 Media Industry Group 76 Consumer Durables & Apparel Industry Group 81 Consumer Services Industry Group 86 Chapter 5 Challenges in the Consumer Discretionary Sector 91 Challenge 1: Growing Profits in Mature Markets 91 Challenge 2: Managing Volatile Demand 101 Case Study: Callaway Golf 106 Chapter 6 Household Debt—Myths and Opportunities 111 Household Debt in Developed Markets—Basically a Very Useful Tool 112 Tremendous Opportunities in Emerging Markets 117 Case Study: Brazil’s Credit-Driven Consumption Boom 118 Part III Thinking Like a Portfolio Manager 127 Chapter 7 The Top-Down Method 129 Investing Is a Science 130 Einstein’s Brain and the Stock Market 131 The Top-Down Method 132 ftoc.indd viftoc.indd vi 4/24/10 1:59:42 PM4/24/10 1:59:42 PM Contents vii Top Down Deconstructed 138 Managing Against a Consumer Discretionary Benchmark 145 Chapter 8 Security Analysis 151 Make Your Selection 152 A Five-Step Process 153 Important Questions to Ask 161 Chapter 9 Consumer Discretionary Investment Strategies 167 Strategy 1: Adding Value at the Industry and Sub-Industry Level 168 Strategy 2: Adding Value at the Security Level 174 Strategy 3: Adding Value in a Consumer Discretionary Sector Downturn 174 How to Implement Your Strategy 176 Notes 179 About the Authors 183 Index 185 ftoc.indd viiftoc.indd vii 4/24/10 1:59:43 PM4/24/10 1:59:43 PM ftoc.indd viiiftoc.indd viii 4/24/10 1:59:43 PM4/24/10 1:59:43 PM