It's not just e-commerce stocks that have boosted the consumer discretionary space since the March lows.
Several stealth plays have soared. Stocks such as Whirlpool, auto parts retailer LKQ Corp., wholesale pool supplies and construction company Pool Corp., and home and farm retailer Tractor Supply have surged at least 100% off of March lows.
Craig Johnson, chief market technician at Piper Sandler, told CNBC on Friday that the outperformance of some of these under-the-radar stocks comes back to how the last year has influenced consumer choices.
"We've got the pandemic that has obviously been leading to people making some different choices in terms of where they live. So they're moving out of the city, they're moving into homes, they're making a lot of changes, so you're seeing anything sort of housing-related doing well and picking up in terms of performance and then couple that together with low interest rates," Johnson said on "Trading Nation."
However, he warned, not all those outperformers will continue to rally.
"If you take a look first at a company like Tractor Supply … this is a stock that looks like it's sort of making a bit of a double top in here, and any sort of break below $136 we've got to be a little bit more cautious on and perhaps look to be taking some money off the table on that," said Johnson.
Instead, he is looking to a stock like Stanley Black & Decker that should benefit from consumer tailwinds and a strong technical foundation.
"The stock is up about 150% off the lows. You got earnings coming out [this] week, and you're just starting to break out to new highs." he said. "I'd be buying this sort of stealth move in here."
Nancy Tengler, chief investment officer at Laffer Tengler Investments, also sees opportunity within the consumer space.
"We've been overweight consumer discretionary pre-Covid, and then we kind of doubled down after the March lows and added. We had a housing emphasis, but we added names like Target and Chipotle, Ulta Beauty and some of the other sort of broader names like Walmart, even though that's a consumer staple. I think these trends are sustainable. You can thank low interest rates, lower energy costs and muted inflation so the consumer now has free cash flow at a historic high," Tengler said during the same "Trading Nation" segment.
Chipotle reported better-than-expected earnings and revenue in its third quarter. Walmart is set to report Nov. 17, Target Nov. 18 and Ulta Beauty Dec. 3.
Disclosure: Laffer Tengler Investments holds TGT and CMG.
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