by Lawrence Meyers | June 5, 2014 9:31 am
Summer is here, and you know what that means: travel, vacations, and more consumer spending.
As people flock to beaches and theme parks, some companies will see a surge in sales. Smart investors can profit during the summer months by snapping up shares of companies that get a boost from summer activity. You just need to find the right ones.
Many of these companies are coming out of abysmal first quarters, which gives investors a great opportunity to jump in while sentiment is still bearish, before everyone realizes what great investments they are. With that said, here are three of the best stocks to buy for summer :
Cedar Fair, L.P. (FUN), an owner of several theme parks, has had quite a ride over the past few years. In 2010, as the financial crisis withered consumer spending, it appeared FUN stock was going to be taken private by Apollo Management for around $11 per share. But shareholders screamed in protest, and the buyout was abandoned.
FUN stock shareholders are patting each other on the back, as the company roared back to life. Today, FUN stock sits just below $55 and it pays a 5.1% dividend to its loyal shareholders
Things are so good for FUN stock that it was able to issue $450 million in unsecured senior notes, replacing debt at 9.125% with new debt at only 5.375%. That will save the company almost $17 million per year in debt service.
FUN stock owns 15 different parks and five hotels (including my local attraction, Knott’s Berry Farm). Theme parks do very well in summer, and there’s been no sign of consumers abandoning that tradition. It remains a value proposition even to middle-class consumers, and FUN stock’s geographic diversification means families don’t necessarily have to travel across the country to get to one of its properties. No matter how you look at it, FUN is a great summer stock to buy.
Speaking of travel, I am not fond of airline stocks, but if there is one airline stock I was forced to own, it would be Southwest Airlines (LUV). LUV stock’s business model simply does not break down, regardless of the economic environment. The stock eclipsed its all-time high in February of this year, but just 18 months ago, LUV stock was trading for a little less than $10.
Southwest remains profitable where all other airlines have gone bankrupt or been forced to merge. It is difficult to see multiple years of growth in the airline industry, but Southwest is experiencing year-over-year growth in EPS, and somehow has more cash than debt.
People will be flying this summer, and fares don’t seem to be slowing down. Done correctly, travel can be a value proposition even for the budget consumer, and Southwest benefits from the budget traveler. That makes LUV a great summer stock.
Finally, the no-brainer play for summer is a company that benefits whenever people spend money — Visa (V).
For the past few quarters, the NY Federal Reserve Report on Household Consumer Debt has shown increases in credit card debt. This breaks a five-year trend in which the American consumer was de-leveraging their home balance sheets, paying off debts of all kinds. Now, they are spending on credit again, and that means Visa will benefit.
I prefer owning Visa over a bank that issues cards because Visa gets a piece of every transaction in its network. It also trades at a cheaper valuation than its rival, Mastercard (MA), making it a better summer stock.
As of this writing, Lawrence Meyers was long V. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at email@example.com and follow his tweets at @ichabodscranium.
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