Most consumer discretionary businesses succeed or fail based on the broader economy. This sensitive demand profile can cause the industry to underperform when macro uncertainty enters the fray, and over the past six months, its 4.2% return has fallen short of the S&P 500’s 7.7% gain.
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 we’re steering clear of.
Caesars Entertainment (CZR)
Market Cap: $4.80 billion
Formerly Eldorado Resorts, Caesars Entertainment (NASDAQ: CZR) is a global gaming and hospitality company operating numerous casinos, hotels, and resort properties.
Why Should You Dump CZR?
- Products and services fail to spark excitement with consumers, as seen in its flat sales over the last two years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $23.43 per share, Caesars Entertainment trades at 7.7x forward EV-to-EBITDA. If you’re considering CZR for your portfolio, see our FREE research report to learn more.
Malibu Boats (MBUU)
Market Cap: $647.6 million
Founded in California in 1982, Malibu Boats (NASDAQ: MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.
Why Is MBUU Risky?
- Number of boats sold has disappointed over the past two years, indicating weak demand for its offerings
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Malibu Boats’s stock price of $33.69 implies a valuation ratio of 24x forward P/E. Check out our free in-depth research report to learn more about why MBUU doesn’t pass our bar.
Howard Hughes Holdings (HHH)
Market Cap: $4.88 billion
Named after the eccentric business magnate and aviator whose legacy lives on in real estate development, Howard Hughes Holdings (NYSE: HHH) develops, owns, and manages master-planned communities and commercial properties across the United States.
Why Do We Steer Clear of HHH?
- Lackluster 17.6% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 7.4% for the last two years
- Returns on capital are increasing as management makes relatively better investment decisions
Howard Hughes Holdings is trading at $82.19 per share, or 2.2x forward price-to-sales. Read our free research report to see why you should think twice about including HHH in your portfolio.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
