Despite escalating prices and brewing fears of a recession, the travel industry is booming, suggesting that entertainment stocks to buy this summer could be a surprisingly robust idea for your portfolio.
But what is driving this change? After all, the substantial decline in purchasing power of the U.S. dollar, along with mass layoffs imply that consumers should lay low instead of seeking amusement.
Well, there’s the simple matter that if the dollar is going to decline in value further, you might as well spend the money today, part of the pernicious nature of inflation. But the biggest catalyst for the movement of people – and thus a downwind spark for entertainment stocks to buy – is the coronavirus pandemic. Having forcibly been cooped up at home for around two years, folks are simply actualizing pent-up demand.
Indeed, while the earnings print from big-box retailers was unpleasant, the spike in product inventories held a silver lining: consumers were gravitating toward experiences rather than the attainment of physical goods. To be fair, no one knows for sure how long this pivot will be sustainable. Still, if you’re bullish, check out the below entertainment stocks to buy.
|DIS||The Walt Disney Company||$103.30|
|SIX||Six Flags Entertainment Corporation||$28.74|
|FUN||Cedar Fair, L.P.||$47.11|
|PLAY||Dave & Buster’s Entertainment, Inc.||$39.64|
|RUTH||Ruth’s Hospitality Group, Inc.||$18.94|
|CNK||Cinemark Holdings, Inc.||$16.31|
Entertainment Stocks to Buy: The Walt Disney Company (DIS)
On the surface, The Walt Disney Company (NYSE:DIS) appears an investment you want to avoid, not one of the entertainment stocks to buy. So far this year, the Magic Kingdom has shed around 33% of market value. Worse yet, this underperformance didn’t just stem from “technical” reasons. Instead, subscriber losses in the company’s Disney+ streaming platform has many Wall Street analysts concerned about its viability.
Still, the saving grace for DIS – along with other embattled entertainment stocks to buy – is the consumer’s pivot to social experiences. And these pivots can be extraordinarily powerful. For instance, e-commerce sales soared throughout most of the new normal as people abandoned in-person shopping for online alternatives. Today, the emphasis is on recapturing social engagements lost during the Covid-19 crisis.
Since Disney is so ingrained in American popular culture, families have an opportunity to make new memories. Therefore, the company’s inimitable theme parks and resorts should keep the lights on and then some.
A major telecommunications conglomerate, Comcast (NASDAQ:CMCSA) features an exceptionally diversified footprint, on paper making it one of the best entertainment stocks to buy. However, Comcast, like its main rival Disney is no stranger to volatility. Headwinds such as cord cutting have put pressure on CMCSA as investors ponder the equity unit’s forward trajectory.
Though not an easy segment to participate in, entertainment stocks to buy could start to perk up this summer. Comcast owns the Universal Studios theme parks, which are incredibly popular in the U.S. and abroad. Therefore, as people get out of their homes to pursue experiences denied them two years ago, CMCSA is poised to be a substantial beneficiary.
As well, it might be too early to give up on Comcast’s TV provider business. Yes, streaming is wonderful and all. However, streaming doesn’t always produce the best experiences when watching sports. With professional leagues returning to the forefront again, the TV side could offer its own surprises.
Six Flags Entertainment (SIX)
Just like its popular rivals, Six Flags Entertainment (NYSE:SIX) finds its equity shares struggling. On a year-to-date basis, SIX is down roughly 32% – a similar level of underperformance with Disney. In this case, Wall Street analysts are concerned about what lies ahead. Six Flags doesn’t make its money in the first quarter. Instead, its Q2 and Q3 that counts most.
Well, the problem of course is inflation and the possibility of a recession on the horizon. With costs of everything going up, neither rich nor modest households can avoid inflation’s impact. Presumably, this downturn of events should keep wallets zipped tight.
I’m not going to sugarcoat these entertainment stocks to buy and suggest no risks exist because they clearly do. However, Six Flags as an operator of theme parks popular with millennials and Generation Z should enjoy tailwinds from the consumer pivot toward experiences. As well, ticket prices are modest compared to, say, traveling halfway around the world.
Entertainment Stocks to Buy: Cedar Fair (FUN)
Though it might not attract the same magnitude of attention as its rivals, Cedar Fair (NYSE:FUN) more than holds its own. A theme park operator of various popular venues – with the most attractive arguably being Knott’s Berry Farm – it stands to benefit from consumers desiring to make up for lost experiences and memories that never were.
What’s interesting about FUN is that unlike other entertainment stocks to buy, it’s been conspicuously resilient on a YTD basis, shedding only 6%. While that’s nothing to write home about, keep in mind that the S&P 500 during the same period has dropped over 15%.
To be fair, FUN stock is subject to the same concerns about inflation, recession and subsequent potential job losses. However, if the transition from physical consumption to experience-based consumption is robust enough, Cedar has one ace up its sleeve: geographic balance.
With its theme parks concentrated in the Midwest, investors have the opportunity to broaden their exposure to entertainment stocks to buy with Cedar Fair.
Dave & Buster’s Entertainment (PLAY)
A popular venue for happy hour and weekend get-togethers, Dave & Buster’s Entertainment (NASDAQ:PLAY) is essentially the Chuck E. Cheese for adults. For many folks, it’s a great icebreaker since the myriad amusement options takes the pressure off of holding a conversation in its entirety – something that you would be forced to do in a restaurant.
Unfortunately, the Covid-19 pandemic put a serious damper on PLAY stock, at one point sending its share price into single-digit territory. Now with fears of the SARS-CoV-2 virus fading into the rearview mirror, people are much more willing to be in close company with others, even in enclosed spaces.
But what would drive people back into Dave & Buster’s doors? Ah, here we get cynical. It’s quite possible that the grand work-from-home experiment could be coming to an end. Indeed, entrepreneur and visionary Elon Musk recently demand employees to return to the office. This suggests down the line that Dave & Buster’s could once again be popular for happy hour.
Ruth’s Hospitality (RUTH)
After just poo-pooing one of the bullish arguments for restaurants, let’s talk about restaurateur Ruth’s Hospitality (NASDAQ:RUTH). Unlike most other eateries, this company – known for its premium Ruth’s Chris Steak House – caters to special occasions. For instance, it has a dress code designed for customer comfort and to keep its exclusive reputation intact.
After two years of ordering food online due to Covid-19 infection concerns, many folks are undoubtedly ready to savor the social experience of fine dining. Yes, inflation and other budgetary pressures will be a concern here as it is for other entertainment stocks to buy. However, it’s not like Ruth’s is a drive-through operation. Consumers have proven they are ready to pay for the social engagements they were previously denied.
And while I haven’t found what the average income for a Ruth’s patron is, consider that the average salary in the company is nearly $88,000. You’ve got to figure the patrons are quite loaded, which might give the restaurateur some economic insulation.
Entertainment Stocks to Buy: Cinemark (CNK)
For the final idea among entertainment stocks to buy, I’m going to go with the most speculative in the form of Cinemark (NYSE:CNK). As you’ve likely heard, the cineplex operator business has been struggling as people gradually shifted to streaming platforms. Then, the Covid-19 crisis struck, capsizing non-essential businesses for several months. But now that Covid fears are declining, can Cinemark make a comeback?
It’s been a tricky proposition since pent-up demand for social experiences have prioritized high watermark venues. Still, the incredible popularity of Top Gun: Maverick – which has been breaking all kinds of box-office records – could have people returning to the big screen.
That’s because Maverick might inspire Hollywood studios to produce agenda-less movies. One of the consistent themes about the Top Gun sequel is that it was fun for everyone, without the woke-ism that so many people on the internets are concerned about.
Maybe this spills over positively for Cinemark, which could use a few hits. Still, play this one with loose change in your pockets.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.