I continue to like companies that are well-positioned in the consumer discretionary space as ways to play rising prices. Unfortunately, I think inflation, at least for the next decade or two, is likely to hold at higher levels than the targets set by most central banks.
This view is based on the idea that generational spending is cyclical. Baby boomers ramped up spending in the late-1970s, driving a peak in inflation in the early 1980s around the time they were in their mid to late-30s. Buying homes, having kids, and adding vehicles can drive demand faster than supply can keep up.
Millennials are now driving the same sort of dynamics. So, for those looking to benefit from TSX-traded consumer discretionary picks, here are three companies I think look too cheap to ignore right now.
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Spin Master
Canadian toy maker and children’s entertainment company Spin Master (TSX:TOY) has been absolutely decimated in recent years. After peaking near $50 per share in 2022, shares of this consumer discretionary company have been on a significant downturn, recently trading closer to the $20 level.
Much of this downturn has been due to deteriorating fundamentals and a pervasive view that children’s entertainment is more cyclical than it has ever been. That’s true.
However, the company’s core intellectual property remains robust, and this is a company I’d argue can innovate its way out of its dip. As more of a speculative pick on long-term consumer spending growth picking up again, I think picking up shares of TOY stock while they’re trading around 8 times forward earnings makes sense.
Dollarama
In the world of Canadian retailers, Dollarama (TSX:DOL) remains one of my top picks, not only because of the company’s long-term growth strategy and the performance of its underlying shares.
Indeed, the stock chart above is one that ought to inspire awe among many investors. Unfortunately, I think the reality is that these trends will continue, as Dollarama’s growth has been driven by a consistent trade-down effect among consumers looking for more cost-conscious options for their household wares.
Providing value in this economy is a business strategy that I think can provide meaningful upside over the long term. And Dollarama’s expansion of its product selection and price increases (I visited a location recently, and the typical $1.25 price was now $1.75 for many items – still cheap, but not where it was previously) could drive continued growth over the long term.
I think we’re going to see this K-shaped economy continue, and perhaps become more robust in the Canadian market. If that’s the case, Dollarama looks like a solid buy, even at what could be considered elevated levels historically.
Restaurant Brands
Last, but certainly not least on this list of consumer discretionary stocks to consider in 2026, is Restaurant Brands (TSX:QSR).
Shares of the fast food giant have benefited from similar trade-down effects as Dollarama of late. As more diners opt for lower-cost value options from one of Restaurant Brands’ core banners (Tim Horton’s, Burger King, and Popeye’s being the three largest), this is a company that could have meaningful upside.
Aside from the fact I view QSR stock as a top dividend play in this current environment with its yield around 3.5%, I think similar growth dynamics should play out as we saw above with Dollarama over time. Thus, with a valuation better than it has been in years, Restaurant Brands is a value, growth, and yield play I think is unmatched today.
