5 Big Consumer Stocks to Buy on the Cheap

BALTIMORE ( Stockpickr) -- Bargain-hunting investors take note: there are some big discounts floating around in consumer stocks.

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Consumer stocks have been heating up over the last six months, gaining steam as they eke out positive performance more quickly than the venerable S&P 500. Because consumer names (especially consumer nondurables) tend to lead the early stages of bull markets, the fact that these names are heating up bodes well for investors in 2013. And with earnings season under full steam starting this week, there's an extra catalyst for shares to move higher -- if they can best the numbers investors are hoping for, that is.

But while all consumer names stand to benefit from the rising tide, some look ready to benefit more than others.

That's because some of the biggest consumer stocks on the market right now are trading for pretty significant discounts compared to the rest of their industries. That's presenting a big opportunity for investors willing to put on their buying hats this month.

With technicals for the consumer stocks sector starting to show overall strength again, this bargain bin is comprised of the other half of the coin -- fundamental valuation metrics that come in cheaper than their sector averages. In particular, we're focusing on firms who are earning more profits, bigger cash flows, and sport better book values than their sector averages.

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Here's everything you need to know about five consumer stock bargains worth buying in 2013.

McDonald's

Up first is fast food giant McDonald's ( MCD). This defensive consumer stock was under fire in 2012, dropping by around 10% over the last 12 months -- so it should come as no huge surprise that the Golden Arches are looking cheap right now. In fact, MCD currently trades for a 31% earnings discount to the rest of the restaurant industry, and nearly a 20% cash flow production discount. Those metrics make McDonald's look like a considerable bargain as we dive into 2013's trading.

McDonald's is the standard bearer in the fast food business, with more than 33,500 locations spread across 119 countries. The firm was one of just a handful of blue chips that actually managed to increase its business -- and its share price -- back in 2008. But that defensive posturing is exactly what's causing investors to eschew McDonald's in favor of higher-end food names now that consumer discretionary spending is heating up again. The firm is responding by hiking its premium offerings here at home, and by reaching out to burgeoning middle class populations in emerging markets (where McDonald's stores are seen as a higher-end dining option).

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