There are 609 companies in the MSCI North America. Of which, 104 (17.1%) are in the consumer discretionary sector. Only the financial sector (109 stocks or 17.9%) account for a larger share in the MSCI North America. Understanding the valuation characteristics of such a large proportion of the MSCI US is important for understanding the valuation situation of the market as a whole. US consumer discretionary stocks have far outpaced the MSCI World Index over the past four years (78% outperformance) and thus, not surprisingly valuations are looking pretty stretched for this sector.
78% of consumer discretionary stocks are trading above their 5-year P/CF average and 54% of stocks are within 20% of their 5-year high P/CF valuation while only 1% of of stocks are within 20% of their 5-year P/CF low. To put that in perspective, 67% of stocks in the entire MSCI US are trading above their 5-year P/CF average and 45% of stocks are within 20% of their 5-year high P/CF valuation and 6% are within 20% of their 5-year P/CF low.
Only 4% of stocks are trading at a P/CF multiple of 5x or less, while over 13% of stocks are trading at P/CF multiple of 25x or more. Overall, 41% of stocks are trading at P/CF multiple of 15 or greater.
