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5 Magic Formula Leisure Stocks With High Business Quality

Now that Halloween has come and gone, investors are preparing for Thanksgiving and Christmas, a major travel season. Considering the strong job growth in the travel and leisure industry during October, investors can also find good opportunities in stocks of companies that operate resorts, casinos and other hospitality services.


According to the Joel Greenblatt (Trades, Portfolio) Magic Formula Screen and All-in-One Screener, two of a wide range of GuruFocus Premium features, five Magic Formula stocks from the travel and leisure industry that have high financial strength and profitability are Booking Holdings Inc. (NASDAQ:BKNG), Carnival Corp. (NYSE:CCL), Hasbro Inc. (NASDAQ:HAS), Johnson Outdoors Inc. (NASDAQ:JOUT) and TripAdvisor Inc. (NASDAQ:TRIP).

U.S. markets soar on strong October jobs report

On Friday, the Dow Jones Industrial Average closed at 27,347.36, up 301.13 points from Thursday's close of 27,046.23. Additionally, the Standard & Poor's 500 Index set a new all-time high close of 3,066.91.

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The U.S. Bureau of Labor Statistics said total nonfarm payrolls increased by 128,000 in October, outperforming the Dow estimate of 75,000 despite the loss of 42,000 jobs in the motor vehicles and parts industry stemming from the General Motors Co. (NYSE:GM) strike. CNBC reported that the leisure and hospitality industry created 61,000 jobs, the highest among all industries.

You can set one of your user portfolios as the universe of stocks in the Screener

One powerful element within the Screener is the "load from portfolio" feature. Figure 1 illustrates the location of this feature.


Figure 1

"Load from portfolio" allows you to set one of your user-defined portfolios as the universe of stocks for the Screener. For example, you might wish to screen from the list of Magic Formula stocks from the travel and leisure industry.

As of Friday, five Magic Formula stocks from the travel and leisure industry have a financial strength rank of at least 6 and a profitability rank of at least 7, two key features of high-quality companies.

Booking

Norwalk, Connecticut-based Booking offers reservation services for hotel and vacation rooms, airline tickets, restaurants, cruises and other vacation packages. The online reservation giant operates several websites, including Priceline.com, Booking.com, Agoda, OpenTable.com, Rentalcars.com and Kayak.

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GuruFocus ranks Booking's profitability 10 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank, a return on equity near a 10-year high of 50.17%, and operating margins that have increased approximately 0.40% per year on average over the past five years. Additionally, Booking's margins and returns are outperforming over 94% of global competitors.

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Gurus with large holdings in Booking include Dodge & Cox, Pioneer Investments (Trades, Portfolio) and Steve Mandel (Trades, Portfolio)'s Lone Pine Capital.

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Carnival

Miami-based Carnival operates several cruise lines, including Carnival Cruises, Princess Cruises, Holland America and P&O Cruises. GuruFocus ranks the company's financial strength 6 out of 10: Although Carnival has strong interest coverage, it has an Altman Z-score below the safe threshold of 2.99 and a debt-to-equity ratio that outperforms just 53.74% of global competitors. Despite this, Carnival's profitability ranks 7 out of 10 on the heels of margins and returns outperforming over 73% of global peers.

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Hasbro

Pawtucket, Rhode Island-based Hasbro manufactures well-known toys and games, which include the popular board game Monopoly. GuruFocus ranks the company's profitability 8 out of 10: Hasbro's Greenblatt return on capital outperforms 78.43% of global competitors, while its return on equity outperforms 79.47% of global peers.

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Johnson Outdoors

Racine, Wisconsin-based Johnson Outdoors manufactures and markets outdoor recreation products like Watercraft, Diving, Marine Electronics and Outdoor Gear. GuruFocus ranks the company's financial strength 10 out of 10 on several positive investing signs, which include robust interest coverage and a strong Altman Z-score of 6.04. Despite this, Johnson's profitability ranks just 7 out of 10 as operating margins that outperform just 57.72% of global competitors offset strong Greenblatt returns on capital and returns on assets.

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TripAdvisor

Needham, Massachusetts-based TripAdvisor offers information and customer reviews on over 4.6 million restaurants, 1.15 million hotels, 750,000 vacation rentals and 875,000 attractions. GuruFocus ranks the company's financial strength 8 out of 10 on several positive investing signs, which include a strong Altman Z-score of 5.22 and debt ratios that are outperforming over 80% of global competitors.

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Disclosure: No positions.

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This article first appeared on GuruFocus.