The brief inversion in the 10-year bond yield to 1.6% has sent jitters through the market. But most experts agree that there are a lot of measures that can be taken to delay or avoid a recession for a considerable period of time.
According to experts, yield curve inversion normally precedes a recession by about 17 months and the market peaks in the following 10 months. So there’s plenty of time for adjustments.
The following buy-ranked stocks are in the consumer discretionary sector and can generate attractive returns in the current environment.
SeaWorld Entertainment, Inc. SEAS
Headquartered in Orlando, FL, SeaWorld Entertainment is a theme park and entertainment company operating primarily in the United States. It owns and operates theme parks, including the popular SeaWorld, Busch Gardens and Sesame Place brands.
The company has staged something of a turnaround after being brought to task by the Blackfish documentary over the way it treated its captive whales. This created a lot of public opinion and started a slide in visits to its theme parks.
But things have quieted down after it paid its fines, slashed its workforce, went through a management shakeup and two CEOs, and generally took measures that most people (except PETA) find acceptable. So its results are looking up.
Zacks Rank #2 (Buy)
Growth Score A - Momentum Score B - VGM Score A
Last 4-quarter average earnings surprise 34.91%, last quarter surprise 23.08%
Current year earnings are expected to grow 209.6%, next year 14.01% on revenue growth of 2.75% and 2.98%, respectively
The current P/E of 18.25X, while higher than the S&P average of 16.82X, is well below its own median value of 21.22X over the past year
Hasbro, Inc. HAS
Hasbro is a global play and entertainment company selling a broad range of goods from toys and games to television, movies, digital gaming and consumer products. Its iconic brands include including NERF, MY LITTLE PONY, TRANSFORMERS, PLAY-DOH, MONOPOLY, LITTLEST PET SHOP and MAGIC: THE GATHERING. Through Hasbro Studios and film labels, Allspark Pictures and Allspark Animation, the company has conquered all screens.
The company has been impacted by the trade war since around two-thirds of its toys are manufactured in China. So the pushback in tariffs is positive for the company. It has also undertaken plans to broaden the manufacturing base to India and Vietnam, so not more than 50% of 2020 production will be in China.
Zacks Rank #1
Last 4-quarter average earnings surprise 95.19%, last quarter 52.94%
Current year earnings are expected to grow 22.34%, next year 12.63% on revenue growth of 8.86% and 4.68%, respectively
The current P/E of 22.59X, while higher than the S&P average of 16.82X and above its median value, it’s still well below its 52-week high. Its estimate revision trend is supportive.
Callaway Golf Company ELY
Callaway Golf is well known for its innovative golf products that help golfers hit longer and straighter shots from tee to green; controlled, higher-spinning shots around the green; and smooth, accurate putts. Callaway Golf sells its products under four powerful brands -- Callaway, Odyssey, Toulon Design and OGIO -- that together offer golfers all over the world everything they need -- clubs, balls, bags, apparel, footwear, bags, accessories -- to play better and enjoy the game more.
The company sells premium products in the outdoors category, consistently buys back shares and also pays a small dividend. The Jack Wolfskin buyout has started contributing to results, which along with typically stronger second half seasonality remain positives for the stock.
Zacks Rank #2
Value A - VGM B
Last 4-quarter average earnings surprise 244.14%, last quarter 48.00%
Current year earnings are expected to grow -0.93%, next year 14.50% on revenue growth of 36.26% and 4.92%, respectively
Its current P/E of 15.21X is not only below the S&P 500 but also below its own median value of 16.07X over the past year.
Penn National Gaming, Inc. PENN
Penn National Gaming owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. It also recently expanded into social online gaming via Penn Interactive Ventures, LLC and the acquisition of Rocket Speed Inc.
The company is set to benefit from the Professional and Amateur Sports Protection Act (PASPA) of 1992 repeal by the Supreme Court in May last year that had banned all kinds of sports betting. It didn’t however criminalize the activity, giving Nevada something of a monopoly in the space.
After the appeal, states have started making their own laws on a market that could yield several billion dollars in revenue. This is naturally a huge positive for a company like Penn, which makes money off legalized sports betting. Management mentioned four partnerships in the last earnings call that will help the company tap opportunities across 19 states.
The company is also expanding its casino footprint by building out itself and through acquisitions.
It returns wealth to investors through share buybacks.
Zacks Rank #1
Last 4-quarter average earnings surprise 4.97%, last quarter 29.41%
Current year earnings are expected to grow 69.89%, next year 39.98% on revenue growth of 48.78% and 4.33%, respectively
Its current P/E of 9.23X is not only below the S&P 500 but also below its own median value of 13.45X over the past year
YETI Holdings, Inc. YETI
Headquartered in Austin, Texas, Yeti Holdings designs, markets and distributes products for the outdoor and recreation market under the YETI brand primarily in the United States. The company's products are designed for use in outdoor activities, including recreational and professional pursuits targeting various categories, including hunting, fishing, camping, barbecue, farm and ranch activities and others.
Zacks Rank #2
Growth A Momentum B VGM A
Last 4-quarter average surprise 51.53%, last quarter 10.00%
Current year earnings are expected to grow 19.78%, next year 20.41% on revenue growth of 13.69% and 12.27%, respectively
The current P/E of 24.86X, while higher than the S&P average of 16.82X, is still below its own median value of 25.90X over the past year
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Penn National Gaming, Inc. (PENN) : Free Stock Analysis Report
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