Industry Overview - Consumer discretionary businesses are sensitive to economic cycles, with recent performance indicating a potential slowdown in demand as discretionary stocks returned 14.8% over the past six months, underperforming the S&P 500 by 4.6 percentage points [1] Companies to Avoid - **Pool (POOL)** - Market Cap: $9.25 billion - Trading at $249.98 per share, equivalent to 21.7x forward P/E [3][5] - **Lovesac (LOVE)** - Market Cap: $191.5 million - Trading at $13.11 per share, equivalent to 50.4x forward P/E [6][8] Company to Watch - **Royal Caribbean (RCL)** - Market Cap: $69.15 billion - Established in 1968, known for innovative cruise experiences [9] - Absence of organic revenue growth over the past two years suggests reliance on acquisitions for expansion [11] - Anticipated sales growth of 3.1% for the next year indicates shaky demand [11] - Poor free cash flow margin of 0.6% over the last two years limits investment flexibility [12] - Impressive 30% annual revenue growth over the last five years indicates market share gains [13] - Expected increase in free cash flow margin by 11.3 percentage points next year suggests more capital for investment or shareholder returns [13]