In this article, we discuss the 10 leisure and recreation services stocks to buy. To skip our detailed analysis, go directly to the 5 Leisure and Recreation Services Stocks to Buy.
During the market downturns of the last five years, the leisure and recreation industry bore the brunt of the damage. Nevertheless, the industry showed resilience over the years and its comeback was stellar. The industry underperformed the broader market in 2023, with The Invesco Leisure and Entertainment ETF (NYSEARCA:PEJ) returning just over 15% returns, compared to the S&P 500’s 25%. However, it has gotten back on its feet from October 2023 lows. Over the last six months, the S&P 500 is up 21.7%, while Invesco Leisure and Entertainment ETF (NYSEARCA:PEJ) is over 27% higher, as of April 25.
Key Stock Trends Reflecting Strong Consumer Spending
Despite the ups and downs in the market, US consumer spending has remained robust. On April 16, Bank of America Corporation’s (NYSE:BAC) president, Brian Thomas Moynihan told CNBC on April 16 that contrary to expectations, the consumer’s spending power and wages managed to keep pace with inflation. He added that while the spending has slowed down, it is still “hanging in there.” The performance of some of the best leisure and recreation stocks such as Booking Holdings Inc. (NASDAQ:BKNG), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Royal Caribbean Cruises Ltd. (NYSE:RCL) is also a testament to the fact that the US consumers are responsible for keeping the market healthy.
In FY23, Booking Holdings Inc. (NASDAQ:BKNG) reported an EPS of $117.40, up 54% year-over-year and sales growth of 25.01%. The company reported annual revenue of $21.4 billion. In addition, the company reported impressive gross margins of 96.89% for FY23. Wedgewood Partners made the following comments about Booking Holdings Inc. (NASDAQ:BKNG) in its first quarter 2024 investor letter:
“Booking Holdings Inc. (NASDAQ:BKNG) contributed negatively to relative performance. The Company grew bookings on their platforms +16% and reported +22% growth in adjusted operating income during their fourth quarter of 2023. We think the market is cautious about the Company’s results for 2024 because they will be lapping very high levels of growth compared to those in 2023 (full year 2023 bookings growth +24%). However, Booking’s end markets continue to be quite healthy, outside of geographies affected by war because consumers still have plenty of wallet share to re-dedicate to travel compared to pre-COVID-19 numbers. We applaud the Company as they aggressively repurchase shares at valuation levels well below the market and peers. This should serve to compound our ownership in Booking’s business, which has exceptional pro2itability.”
While Hilton Worldwide Holdings Inc.’s (NYSE:HLT) stock has outperformed the S&P 500, recording nearly 44.28% share price growth over the past twelve months as of April 25, its profitability took a slight hit in 2023 as the travel demand normalized in the year. In 2022, the pent-up leisure travel demand after the COVID-19 pandemic made healthy profits for the company. However, the company’s net income dropped from $1.257 billion in 2022 to $1.151 billion in 2023. Nevertheless, the company’s revenue per available room increased by 12.6% in 2023 due to an increase in occupancy and average daily rate. Finally, the company reported record adjusted EBITDA of nearly $3.1 billion as mentioned by the company’s CEO, Chris Nassetta at Hilton Worldwide Holdings Inc.’s (NYSE:HLT) latest earnings call:
“Strong top line performance drove record adjusted EBITDA of nearly $3.1 billion, up roughly 20% year-over-year to the highest level in our company’s history. During the year, we launched two new brands, introduced new innovations, expanded our partnerships and opened a near record number of rooms, all of which further strengthened our network and enabled us to welcome more guests than ever before.
Our strong top and bottom line performance drove significant free cash flow, enabling us to return $2.5 billion to shareholders.”
The Multibagger Leisure Stock
Royal Caribbean Cruises Ltd. (NYSE:RCL) has been making strides since last year. The company is one of our best multibagger stocks as its stock price has gained more than 123% over the last twelve months, as of April 25. The company released its first-quarter 2024 earnings on April 25 and reported an EPS of $1.77, ahead of analysts’ estimates by $0.46. In addition, the company’s revenue grew by 29% year-over-year and amounted to $3.7 billion. After a strong Q1 performance, Royal Caribbean Cruises Ltd. (NYSE:RCL) also raised its Q2 2024 and full-year guidance. The company expects an EPS of $2.65 to $2.75 for the second quarter and an EPS of $10.70 to $10.90 for FY24. The company’s CEO Jason Liberty made the following comments at its Q1 earnings call:
“In the first quarter, we delivered 2 million memorable vacations and achieved 107% load factor at exceptional guest satisfaction scores. Yields grew 19.3% compared to the first quarter of 2023, almost 400 basis points above our initial guidance. Adjusted earnings per share in the first quarter was considerably higher than our guidance. Strong ticket and onboard revenue and favorable timing of expenses contributed to the better-than-expected earnings performance.
The acceleration of demand is also translating into higher revenue and earnings expectations for the balance of the year. As you can see on Page 5, we are increasing full-year yield growth expectations by 50% compared to our initial guidance in early February, and we now expect adjusted earnings per share to grow 60% year over year. The increased outlook for the year is expected to further accelerate our trajectory toward our trifecta goals as we continue to expect to achieve all three goals in 2024, one year earlier than initially expected. Now I’ll provide some insight into the robust demand environment and our incredible wave season.”
With this context, let’s look at the best leisure and recreation services stocks to buy which include The Walt Disney Company (NYSE:DIS), Booking Holdings Inc. (NASDAQ:BKNG), and Expedia Group, Inc. (NASDAQ:EXPE).
10 Leisure and Recreation Services Stocks to Buy
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify 20 mid to large-cap leisure and recreation stocks and then narrowed down our list to 10 stocks most widely held by institutional investors. The companies are listed in ascending order of their hedge fund sentiment.
The hedge fund data was taken from Insider Monkey’s database of 933 elite hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
10 Leisure and Recreation Services Stocks to Buy
10. Wynn Resorts, Limited (NASDAQ:WYNN)
Number of Hedge Fund Holders: 46
Wynn Resorts, Limited (NASDAQ:WYNN) is engaged in the design, development, and operation of integrated resorts. The company offers its services through Wynn Palace, Wynn Macau, Las Vegas Operations, and Encore Boston Harbor segments. 46 hedge funds held stakes in the company in the fourth quarter of 2023, with positions worth $959.356 million. Fisher Asset Management is the most significant shareholder of the company, as of December 31, 2023, with a position worth $357.883 million.
As of April 22, Wynn Resorts, Limited (NASDAQ:WYNN)’s analyst average price target of $116.82 has an upside of 19.84% from the present levels and the stock has a consensus Buy rating among 7 Wall Street analysts.
Wynn Resorts, Limited (NASDAQ:WYNN) joins The Walt Disney Company (NYSE:DIS), Booking Holdings Inc. (NASDAQ:BKNG), and Expedia Group, Inc. (NASDAQ:EXPE) on our list of leisure and recreation services stocks to buy.
Baron Real Estate Fund stated the following regarding Wynn Resorts, Limited (NASDAQ:WYNN) in its fourth quarter 2023 investor letter:
“The shares of Wynn Resorts, Limited (NASDAQ:WYNN), an owner and operator of hotels and casino resorts, declined modestly in the most recent quarter, in part due to concerns about economic weakness in China.
We remain optimistic about the multi-year prospects for the company. We believe the ongoing re-emergence of business activity in Macau will drive additional shareholder value. If cash flow returns to the level achieved in 2019 prior to COVID-19, we believe Wynn’s shares will increase 30% to 50% higher than where they have recently traded.
We believe additional drivers for future value creation beyond a re-emergence in Macau business activity include: (i) our expectation for long-term growth opportunities in the company’s U.S.-centric markets of Las Vegas and Boston, including an expansion of Wynn’s Encore Boston Harbor resort; (ii) Wynn’s plans to develop an integrated resort in the United Arab Emirates with 1,500 hotel rooms and a casino that is similar in size to that of Encore Boston Harbor; (iii) opportunities to improve cash-flow margins by rightsizing labor and achieving lower staff costs in Macau; (iv) the possibility that Wynn is granted a New York casino license; and (v) an expansion in the company’s valuation multiple to levels achieved prior to the pandemic.”
9. Las Vegas Sands Corp. (NYSE:LVS)
Number of Hedge Fund Holders: 48
Las Vegas Sands Corp. (NYSE:LVS) is an owner, developer, and operator of integrated resorts, including The Venetian Macao Resort Hotel, the Londoner Macao, The Parisian Macao, and others.
On April 18, Las Vegas Sands Corp. (NYSE:LVS) declared a quarterly dividend of $0.20, payable by May 15 to the shareholders of record on May 1. As of April 22, the stock has a dividend yield of 1.72%.
On April 18, Citi raised the price target on Las Vegas Sands Corp. (NYSE:LVS) to $75 from $74 and kept a Buy rating on the shares.
Hedge fund sentiment was positive toward Las Vegas Sands Corp. (NYSE:LVS) in the fourth quarter of 2023 as hedge funds with positions in the stock were 48 in the quarter, with positions worth $2.52 billion. This is compared to 45 funds with positions worth $1.55 billion in Q3. Fisher Asset Management is the most dominant shareholder in the company as of Q4 of 2023. In the quarter, the firm increased its stake by 7% to 11.263 million shares worth $554.282 million.
8. Marriott International, Inc. (NASDAQ:MAR)
Number of Hedge Fund Holders: 52
Marriott International, Inc. (NASDAQ:MAR) takes the eighth spot on our list of leisure and recreation services stocks to buy and the company operates lodging properties under various brands, including JW Marriott, The Ritz-Carlton, and Westin, among others.
Marriott International, Inc. (NASDAQ:MAR) has seen a trailing twelve-month EPS year-over-year growth of 40.57% and the stock has gone up by 36.18% in the last twelve months, as of April 22.
In the fourth quarter of 2023, 52 hedge funds held positions in Marriott International, Inc. (NASDAQ:MAR), and their stakes amounted to $2.4 billion. With 4.39 million shares worth $990.328 million, Fundsmith LLP is the top investor in the company, as of December 31, 2023.
Vulcan Value Partners made the following comment about Marriott International, Inc. (NASDAQ:MAR) in its Q3 2023 investor letter:
“Marriott International, Inc. (NASDAQ:MAR) is a company that we have owned several times in the past. The company is an asset-light global lodging franchisor and operator that benefits from strong network effects. Approximately 99% of Marriott’s global rooms are managed or franchised which enables the company to generate high returns on capital. Marriott has an extensive portfolio of brands ranging from luxury brands such as The Ritz-Carlton, to premium brands such as Westin Hotels & Resorts, to select brands such as Residence Inn by Marriott. The company is doing an excellent job converting independent hotels into the Marriott system through its soft brands including the Luxury Collection, the Autograph Collection, and the Tribute Portfolio. This conversion opportunity should benefit Marriott’s net unit growth in a period when new hotel development could be challenging in North American and Europe. The company generates robust free cash flow through its long-term, contracted franchise fee and management fee revenue streams. Its competitive advantages include brand strength, operational scale, direct booking systems, and loyalty programs. We sold Marriott in the first quarter of 2020 because of our concerns about the company’s debt structure. Since then, Marriott has restructured its debt and improved its balance sheet. Additionally, average daily rates (ADR) on corporate travel have returned to pre-Covid levels.”
7. Royal Caribbean Cruises Ltd. (NYSE:RCL)
Number of Hedge Fund Holders: 54
Royal Caribbean Cruises Ltd. (NYSE:RCL) is a cruise company that operates different brands, including Celebrity Cruises, Silversea Cruise, and more. 54 hedge funds had investments in Royal Caribbean Cruises Ltd. (NYSE:RCL) in Q4 of 2023 worth $2.417 billion. As of December 31, 2023, D E Shaw is the most prominent shareholder in the company and has a position worth $632.386 million.
On April 17, Mizuho initiated coverage of Royal Caribbean Cruises Ltd. (NYSE:RCL) with a Buy rating and a $164 price target.
Ariel Investments stated the following regarding Royal Caribbean Cruises Ltd. (NYSE:RCL) in its fourth quarter 2023 investor letter:
“Some holdings in the portfolio advanced considerably this quarter. Global cruise vacation company, Royal Caribbean Cruises Ltd. (NYSE:RCL), advanced on another quarterly earnings beat and subsequent raise in full-year guidance driven by stronger than anticipated consumer demand and solid cost containment. The company continues to experience solid momentum in onboard spend, while 2024 booking trends are significantly ahead of historical ranges at higher pricing. We believe the resiliency of the core cruise consumer in combination with management’s superior operational expertise and revised earnings outlook lays the foundation for RCL to exceed its three-year strategic imperative, the Trifecta Program.”
6. DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 55
DraftKings Inc. (NASDAQ:DKNG) is a Massachusetts-based company that offers online sports betting and casino, sports betting and casino gaming software, and daily fantasy sports, among other product offerings.
As of April 22, DraftKings Inc. (NASDAQ:DKNG) has a consensus Buy rating among 26 analysts, and its average price target of $52.23 represents an upside of 25.76% from current levels.
According to our database, DraftKings Inc. (NASDAQ:DKNG) was part of 55 hedge funds’ portfolios in the fourth quarter of 2023 with a total stake value of $2.24 billion. As of April 22, the stock has a market capitalization of $19.289 billion.
DraftKings Inc. (NASDAQ:DKNG) is a leisure and recreation services stock that has caught the attention of institutional investors. Other such stocks include The Walt Disney Company (NYSE:DIS), Booking Holdings Inc. (NASDAQ:BKNG), and Expedia Group, Inc. (NASDAQ:EXPE).
Baron Funds stated the following regarding DraftKings Inc. (NASDAQ:DKNG) in its fourth quarter 2023 investor letter:
“We added to our position in DraftKings Inc. (NASDAQ;DKNG), the leading mobile sportsbook and gaming operator in the U.S. While we lowered our estimates for the fourth quarter due to lower hold in the month of November, it is important to keep in mind that while hold can be volatile from quarter to quarter, the company continues to slowly increase hold over time (primarily because of a higher percentage of the handle being in higher hold “parlay” bets). We continue to be attracted to DraftKing’s dominant market share and the scale advantages that come with this.”
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Disclosure. None. 10 Leisure and Recreation Services Stocks to Buy is originally published on Insider Monkey.
