Leisure and travel stocks are expected to perform well this year as consumers become more confident and willing to spend on recreational activities. This trend is supported by three key economic factors: surging consumer sentiment, plentiful job opportunities, and a productivity boom. According to five money managers, there are 11 promising stocks that investors should consider in this sector.
Consumer sentiment has seen a significant increase, with the University of Michigan consumer sentiment index rising by almost 10 points in January. This surge is attributed to improved outlooks for inflation and income. Additionally, jobs are plentiful, as nonfarm payroll employment increased by 353,000 in January, and average hourly earnings rose by 4.5% over the previous year. These factors make consumers more confident about spending on leisure activities.
The productivity boom is another factor contributing to increased spending power. Productivity growth was a robust 3.2% in the fourth quarter of 2023, supporting pay hikes and reducing pressure on companies to raise prices. This, in turn, boosts economic growth.
Based on these trends, there are 11 leisure stocks that are likely to benefit:
1. Caesars Entertainment (CZR): This casino and hotel company is expected to benefit from pent-up demand for travel post-Covid. Efforts to reduce its high debt levels may also contribute to its success.
2. Hilton Worldwide Holdings (HLT): As a major builder of hotels during a time of room shortages, Hilton is well-positioned to capitalize on leisure travel spending. Independent operators are also converting to the Hilton brand, boosting business.
3. Ryanair Holdings (RYAAY): Despite an economic slump in Europe, Ryanair’s lower costs and stronger balance sheet allow it to take market share from struggling competitors. The airline remains profitable and is using its profits to buy more landing slots at airports.
4. Amadeus IT Group (AMADY): This software provider runs booking systems for airlines and hotels, as well as in-house media systems at hospitality chains.
5. Euronet Worldwide (EEFT): With over 50,000 ATMs worldwide, Euronet Worldwide is a travel play that benefits from increased tourism and consumer spending.
6. Take-Two Interactive Software (TTWO): This gaming software company is favored due to its popular titles and upcoming releases, such as Grand Theft Auto VI.
7. Electronic Arts (EA): As another major gaming software company, Electronic Arts is expected to release an updated version of its Sports College Football series, featuring popular college stars.
8. Vista Outdoor (VSTO): This outdoor supply manufacturer, known for brands like Bell, Fox Racing, and CamelBak, is predicted to experience growth as retailers and manufacturers restock inventory.
9. Johnson Outdoors (JOUT): As a maker of fishing products like sonar and GPS systems, Johnson Outdoors is well-positioned to benefit from the continued interest in outdoor activities.
10. Sportsmans Warehouse Holdings (SPWH): This retailer selling outdoor supplies is singled out for its potential growth in demand for outdoor products.
11. Pool (POOL): As a wholesaler of pool maintenance products, Pool benefits from the increased popularity of backyard pools and ongoing migration to warmer regions.
Overall, the leisure and travel sector is expected to see positive growth as consumers regain confidence and increase their spending on recreational activities. These 11 stocks offer promising investment opportunities in this thriving industry.
