With summer underway, we figured that it was an appropriate time to take a look at some of the stocks associated with beach & pool season. As shown below, Google searches for “beach”, “pool”, “boat” and “grill” are all actually elevated relative to historical levels during the week of May 31st, with each hitting a five year high. We’re actually seeing consumers searching for these popular summer activities at record rates, and they usually don’t peak until right around July 4th. This suggests “hot” activity as we roll into the summer months when consumers get outdoors. From an economic standpoint, it’s good to see searches at these levels especially with gas prices continuing to surge.
Although searches and interest in these activities are hitting a multi-year high, the prices of stocks with exposure to these industries have gone in the other direction. Starting with beaches and boats, six stocks with direct exposure include Brunswick (BC), Yeti (YETI), MarineMax (HZO), MasterCraft Boats (MCFT), Malibu Boats (MBUU), and Marine Products (MPX). On average, these stocks are down 24.9% year to date (median: -21.6%) and trade 1.2 times last twelve-month sales (median: 1.0). Although these stocks trade just 10.2 times LTM earnings per share (median: 8.5), they saw EPS rise by an average of 15.5% y/y in the most recent quarter (median: 13.4%). In the latest quarter, sales also improved by an average of 17.3% (median: 18.5%). Despite the relatively strong fundamental trends, investors appear to be looking forward anticipating weaker levels of growth once the pent up demand wanes.
Within the pool and grill space, we were able to identify four near-pure plays: Pool Corp (POOL), Leslie’s (LESL), Traeger (COOK), and Weber (WEBR) which is not shown. On average, these stocks are down 37.8% (median: 36.0%) year to date compared to the S&P 500’s decline of just over 14%. These companies saw sales grow by 15.6% y/y on average (median: 18.5%) in the most recent quarter. The average price to sales multiple for this group is 1.6 (median: 1.6). Granted, the weak YTD performance can be largely attributed to WEBR and COOK, as the market has punished recent IPOs. Nonetheless, the underperformance is still notable given the assumed hike in demand.
Over the last twelve months, beach, pool, boat, and grill stocks (on an equal-weighted basis) have underperformed the S&P 500. This underperformance has been consistent. Granted, not all of the names on the list are pure plays, but all of the stocks have exposure to the space in one way or another. As you attend outdoor events at the bool, beach, or on the water in the coming weeks, keep these stocks in mind! Click here to become a Bespoke premium member today!