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Test the Leisure & Recreation Waters with These 4 Stocks

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·4 min read
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Expectations for 2022 can be called ‘mixed’ right now.

COVID continues to wax and wane, and newer iterations of the virus can still upset plans. But the increasing immunity (by vaccination or infection) is increasing confidence in herd immunity coming sooner rather than later. So people are mostly taking COVID in stride now. And that means they want greater normalcy in their activities. Which is positive for spending.

The only thing that can stop them is the continually increasing inflation that is raising the cost of routine things like food and fuel.

Speaking of fuel, oil was anyway in short supply and the Russia-Ukraine situation can make things worse. So prices are likely to remain high for a while now.

Auto inventory issues may be easing, but there still seems to be greater demand for the used category. Prices need to come down for this situation to change.

The supply chain is taking its own sweet time to straighten out.

The semiconductor shortage persists but there’s progress on availability of key chips.

The Fed is headed for 6-7 rate hikes this year, which can only be bad news for the stock market. But the fear of hanging on led investors to dump many stocks, leading to a major correction at the beginning of the year itself. As a result, many sectors are now trading below their intrinsic value.

Considering all of the above and the fact that the economy remains so strong, it’s not a bad idea to bet on some consumer facing stocks. Something like leisure for instance.

Stocks like Pool Corp. POOL, Brunswick Corp. BC, OneWater Marine, Inc. ONEW and MasterCraft Boat Holdings, Inc. MCFT have seen their prices fall a respective 24.3%, 6.5%, 4.7% and 3.0% in the last three months and are currently trading at reasonable or cheap valuations.

With the boating season around the corner and investors still largely focused on other things, this may be just the right time to pick up these Leisure and Recreation stocks (top 29% of Zacks-classified industries where the top half outdoes the bottom half by a factor of 2 to 1). The industry has lost over 22% of its value in 2022 and is undervalued at this point.

But as the season gets closer, these stocks are very likely to trend up. Especially since their estimates have been moving higher. For the current year,

Pool Corp’s revenue and earnings are expected to increase 9.9% and 11.7%, respectively with further growth slated for the following year. In the last 30 days, the Zacks Consensus Estimate for Pool Corporation stock has increased 50 cents (3.0%). There is a steady history of beating estimates.

Brunswick’s revenue and earnings are expected to increase 17.4% and 22.0%, respectively. In the last 30 days, Brunswick Corporation’s earnings estimates for 2022 have moved up 89 cents (9.7%). It has topped estimates in each of the last four quarters.

OneWater Marine’s revenue and earnings are expected to increase a respective 37.9% and 19.5% (year ending in September). Current-year estimates are up 49 cents (6.3%) in the last 30 days. OneWater Marine’s average earnings surprise in the last four quarters is 59.0%.

MasterCraft’s revenue and earnings are expected to increase a respective 24.5% and 29.0% (year ending June). Current expectations for growth in the following year is 9.4% for revenue and 15.5% for earnings. MasterCraft’s Estimates for both 2022 and 2023 are up: 20 cents (4.9%) and 36 cents (7.9%), respectively. It has topped estimates in each of the last four quarters at an average rate of 24.9%.

OneWater Marine has a Zacks Rank #1 (Strong Buy) while Pool Corp., Brunswick Corp. and MasterCraft have a Zacks #2 (Buy) rank.

Price Movement Over Last 3 Months

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Pool Corporation (POOL) : Free Stock Analysis Report

Brunswick Corporation (BC) : Free Stock Analysis Report

MASTERCRAFT BOAT HOLDINGS, INC. (MCFT) : Free Stock Analysis Report

OneWater Marine Inc. (ONEW) : Free Stock Analysis Report

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