Opinion: People are eager to go golfing, boating and camping – and these ‘great outdoors’ stocks may be the beneficiaries
Let’s face it, as the lockdown restrictions on Covid-19 relax, we are not getting back to ‘normal’. Even if the virus subsides, which is not at all acquired, we will be reprogrammed to favor outdoor activities that do not involve many people.
Fund manager Eric Marshall at Hodges Capital Management in Dallas predicts that this trend will boost sales at boating, golf, recreational vehicle and camping companies.
“People are more likely to do these things than get on a plane and fly to Europe for their summer vacation,” he says. “Millennials were already engaging in outdoor activities like camping and cooking outdoors. “
“The first weekend in May “was the biggest weekend in the history of our company, period”.“
The “great outdoors” trend is supported by insider buying, which I monitor daily for ideas for my stocks newsletter, Brush Up on Stocks. Executives bought shares in companies benefiting from this trend. More on that below.
“People will be hesitant to participate in mass experiences like sporting events and concerts,” says Kim Scott, who manages the Ivy Mid Cap Growth Fund IYMIX,
“Anything that involves sharing your experience with lots of people you don’t know will be considered too risky for a while. ”
Research supports this trend.
“Studies suggest that activities organized outdoors as temperatures warm pose a lower Covid risk than those performed in confined indoor spaces,” said Scott Gottlieb, former Commissioner of the Food and Drug Administration, in a tweet. He cites a Chinese study which found that outbreaks outside were rare.
Outdoor product companies are already noticing this.
“The joy of being outdoors, whether hiking, camping or just taking a nature walk, has never been so evident and is both logical and emotionally appealing. today more than ever, ”said Chip Brewer, CEO of Callaway Golf, in the May 7 results. call.
Certainly, leisure products stocks have been among the hardest hit as investors worry about the length of the foreclosure and the recession. Some states started opening parts of their economies in late April, and momentum is building this month. It is still a mixed affair.
As of May 13, the leisure products group of the S&P 500 was down 40% year-to-date, compared to a 12.7% decline for the S&P 500 SPX,
himself. But as far as this pressure is on stocks, below, it only makes it a better deal.
suspended guidance. But behind the scenes, there are already clear hints that boating is more popular. Not surprising. It is an ideal activity in the outside and isolationist world of Covid-19.
“We have certainly seen some good leading indicators on loan applications, which have increased significantly recently compared to last year,” CEO David Foulkes said on the May 1 conference call. “We are getting more and more attractions from dealers, especially on the premium side. “
Membership in the Freedom Boat Club of Brunswick at the end of April was almost double what it was a year earlier. With the closure of college and school sports and international vacations less appealing, people have decided to buy boats for fun outdoors and to keep the distance, he says.
By the end of April, virtually all of Brunswick’s factories had reopened globally, and China’s supply chain was fully operational, shipping parts to the United States and elsewhere. The company says it will be profitable and post positive free cash flow in the second quarter, and that the dividend for the quarter is secure. (It has an annual return of 2%.)
Callaway Golf: golf equipment
Golf etiquette requires groups of players to keep a good distance so that no one gets harassed. This makes golf an ideal outdoor social distancing activity.
If China is a guide – because it was early to come out of the Covid-19 lockdown – 2020 will be brilliant. ELY from Callaway,
Golf activity in that country rebounded to 2019 levels in April, and apparel activity declined only slightly. “We believe our Asian business will make a positive contribution for the remainder of the year,” said CEO Brewer. “In Korea, departure times outside Seoul would already be booked until May.”
Central European markets are starting to reopen and in the United States, 80% of courses will soon be open, according to the National Golf Foundation.
Brewer says golfers overwhelm courses as soon as they open. “Golf is considered to be a relatively safe and healthy outdoor activity,” he says. It doesn’t hurt that many golfers are wealthy at a time of tight income. Behind the scenes, Callaway just completed a major upgrade at its Chicopee, Massachusetts golf ball factory. And he’s launching a large distribution center in Texas, which will help with inventory management.
Camping World: motorhomes, motorhomes
It is the largest recreational vehicle retailer in the United States. The company also offers financing, protection plans and insurance, all sources of recurring income that will be useful during the crisis.
Harsh times can disappear quite quickly in the motorhome world. There are already signs that this is happening. CWH of Camping World,
business took off after a month-long lull that ended in mid-April. The first weekend in May “was the biggest weekend in our business history, period,” CFO Mel Flanigan said on the May 7 conference call. “We feel good about the direction these trends are taking. ”
CEO Marcus Lemonis attributes this to social distancing. “I don’t need to go to an airport. I don’t need to go to the hotel. I don’t need to go to a foreign country. Recreational vehicles provide isolation, while allowing people to be outside and be with their families, ”he says.
Camping World was already stocking less expensive motorhomes, in favor of smaller, cheaper units that even a Prius can pull. It might pay off now that people have less money. Camping World has said it will maintain its dividend. (The return is 2.1%.) Company insiders were buying the stock recently, usually a bullish sign.
Thor Industries: VR
Thor Industries THO,
is the world’s largest RV manufacturer. Thor builds Airstream, Hymer and other popular brands in the United States and Europe. It is the largest seller of motorhomes in North America, with a 37% market share. It is strong in Europe, with a share of 26%.
At the height of the Covid-19 fear, things were already improving as a glut of inventory in the retail channel had finally dissipated. Now, Thor is expected to see relatively strong demand, given the new standard in recreation, according to Argus research. The company attracts young buyers by introducing low-cost trailers. In addition, the price of gas is low. The company’s recent insider buying supports the bull’s case.
Vista Outdoor: bikes, camping gear, ammunition
Vista Exterior VSTO,
sells a lot of the things people need in the outdoors – grills and stoves, helmets and goggles for cycling and snow sports, binoculars and golf gear.
Its sport shooting division offers ammunition, weapon maintenance products and archery equipment. Brands include CamelBak, Camp Chef, Bushnell Golf and Bell in outdoor activities, and Federal Premium, CCI and Speer in ammunition.
The new emphasis on the outdoors has driven demand for helmets and outdoor cooking and cycling accessories, the company says. This has also contributed to the demand for ammunition, but it is also due to concerns about personal safety.
At the time of publication, Michael Brush does not have any positions in the stocks mentioned in this column. Brush suggested BC and CWH in their stocks newsletter, Brush Up on Stocks. Brush is a Manhattan-based financial writer who covered business for The New York Times and The Economist Group, and he attended Columbia Business School. Follow him @mbrushstocks.