Travel and tourism have been modified by the COVID-19 pandemic, but not canceled. The picture has changed to manageable vacations and getaways, and if investors can see the picture accurately, investment opportunities arise.
As Americans choose to distance themselves socially in the wild to get away from it all this year, Brunswick (NYSE: BC) It is configured to meet the growing demand for its marine engines and ships. Meanwhile, at the other end of the spectrum in terms of nature, Walt disney (NYSE: DIS) is reopening theme parks as its successful streaming service, Disney +, grows. I think both companies present opportunities to increase share prices.
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Brunswick finally focuses on the right industry at the right time
Brunswick, the maker of recreational craft and marine engines, is one of the longest listed companies on the New York Stock Exchange. The company’s long history allows us to see performance during recessions. It is not really very good.
Brunswick earned $ 2 to $ 3 a share in the run-up to the 2007-2008 financial crisis, but lost more than $ 5 a share in 2009. After the crisis, the stock fell to $ 2 from $ 40. Expectations Current sales are down 12% this year. So why would you want to invest in the world?
Because that was a very different Brunswick, trying to spread its attention among too many disparate companies. The company sold its bowling alley business in 2015, its fitness business in 2017, and its billiard business in 2019. Before that, the company was on everything from defense to school furniture and medical supplies.
“Brunswick used to be a hodgepodge of leisure brands,” said James Hounsell, associate portfolio manager at Centerstone Investors. “Now, it’s a much better business.”
Today, Brunswick is fully focused on the marine business, manufacturing Boston Whaler fishing boats and Sea-Ray speedboats, as well as Mercury brand speedboat engines. As Americans plan getaways closer to home and nature, as evidenced by high demand in the recreational vehicle (RV) market, the increasing demand for boats will likely follow. So far, investors have lavished love for recreational vehicle manufacturers ‘shares, up 20% this year, while boat manufacturers’ share prices have languished.
One of the best ways to measure demand is to talk to distributors. Guy Connor, owner of Midway Marine in Fulton, Miss. Since 1995, he noticed a “big spike” in sales from Memorial Day to Father’s Day weekend. In a July 4 interview with the Mississippi Clarion Ledger, Connor said: “We are up nearly 30% from last year at this time. The pandemic had a lot to do with boosting sales. Demand is outpacing the supply for people to improve get the boats while they can. “
In 2019, Brunswick had sales of $ 4.1 billion, earning $ 371 million, or $ 4.33 per share. Cost cutting was in focus as 20 manufacturing facilities in North America were closed, leaving the company with nine in operation. Cost savings reached around $ 50 million, and it is expected to be realized in 2020.
I think Brunswick’s stock is a mature investment opportunity for the national team. Demand for boats and marine engines is strong as pandemic vacations take place close to nature. Brunswick finally focuses entirely on one industry and cuts costs while reinforcing profitable businesses like Mercury engines. Lately, this stock has gotten a bit of attention, but I think it still has a good way to go.
The House of Mouse is strong despite the challenges of the health crisis
The pandemic hit The Walt Disney Company hard, shutting down its theme parks and halting production of studio entertainment, not to mention the loss of live sports on ESPN. The stock is down 17% year-to-date, but that may be about to change.
Leaving the closings aside for now, Disney shows significant strength in the Disney + streaming service. The Disney + app had more than three-quarters of a million new mobile downloads over the weekend of July 4. In the United States, downloads increased 74% from the average of the previous four weekends. The service released the hit musical Hamilton on July 3, which undoubtedly generated new traffic.
What is especially notable is that Disney had stopped providing seven-day free trials to new subscribers prior to launch. Even if new subscribers just wanted to see HamiltonThey still paid for at least a month, more than enough time for them to test the service and hopefully keep it. Subscriptions in the United States cost $ 69.99 per year, or $ 6.99 per month.
Disney + has been introduced in Japan and will launch in several new European and Latin American markets before the end of the year.
Meanwhile, theme parks have been on an expensive hiatus since the coronavirus closed them. They are reopening with strict guidelines for social distancing and security protocols, although Hong Kong Disneyland announced on Monday that it will close its doors once again due to an increase in coronavirus cases in the region.
Disney parks in Orlando have just reopened, but there is no way of knowing if they will continue. On July 12, the day after the Orlando parks reopened, Florida broke its highest infection record in a single day with 15,300 new cases.
While Disney does not publish attendance figures, a website dedicated to everything Disney related had a staff member present at the reopening of Disney World to report on the size of the crowd. The bottom line was that there was a fairly normal-sized crowd in the morning, with the longest 50-minute wait at Pirates of the Caribbean, and a small crowd in the afternoon. All things considered, it was a pretty good start and showed that Disney’s appeal has not faded during the COVID-19 pandemic.
I think Disney is not only showing strength back at theme parks, but an increasing presence in the competitive streaming entertainment industry. I see the current stock price, 17% lower this year, as a buying opportunity if you have a long-term investment horizon.
At some point, the health crisis will end and the demand for entertainment will increase, leading crowds to movie theaters and theme parks. Meanwhile, Disney + is well established in the US and is rapidly expanding internationally, providing a growing revenue stream.
There will surely be obstacles along the way, but within a year, I think we will look back and wonder why Disney’s stock ever fell so low.
