Trade war tensions, which sparked off in March with President Donald Trump’s 25% and 10% tariffs on imported steel and aluminum, respectively, led to a string of retaliations. The ensuing dispute cast a pall over many industries since the next course of action to be taken by China and the United States is nearly impossible to predict. Moreover, Facebook’s recent data misuse scandal has fueled fears of a regulatory clampdown on tech and Internet companies. Trump’s recent tweet, warning Russia of an imminent missile attack on Syria, has added to investors’ worries.
That said, investors can bank on a few sectors that seem safe from these growing tensions. One of the most favored among these is leisure. Given that these stocks remain insulated from trade war fears and geopolitical tensions, investing in these stocks is a wise idea. Moreover, the luxury travel market is fast growing, given the bullish economic outlook, higher wages and strong consumer confidence.
Favorable Economic Background
The current economic scenario looks strong with a steady rise in wages, upbeat consumer confidence and a record low jobless rate. This certainly is a good sign, as with a steady rise in income, consumers tend to spend more on leisurely activities. Moreover, Trump’s business-friendly policies that include tax cuts have made the economic backdrop look favorable.
Also, GDP grew at a 2.9% annual rate in the last quarter of 2017, marking the economy’s strongest stretch of growth since the expansion started in mid-2009. Moreover, the unemployment rate remains flat at a 17-year low of 4.1% and chances are that it will meet the Fed forecast of 3.8% by the end of 2018.
Most significantly, U.S. consumer confidence touched a 14-year high in March after tax cuts gave a boost to disposable income. Moreover, consumer spending is expected to further rise through 2018. This positive sentiment is definitely going to encourage consumers to spend more on travel leisure activities.
Impressive Industry Performance
Given the high consumer confidence and steady rise in wages, people are not hesitant to spend on luxury travel and leisure activities. Luxury travel is booming given the general consumer sentiment toward the market is changing.
High-end travel accounts for 7% of the market and annual growth is in double digits, according to High ITB World Travel Trends Report 2017/2018. Moreover, per the report, worldwide outbound travel is expected to increase 5% with robust growth in Asia and Latin America. According to Profit Matters: U.S. Annual Hotel Performance Tracker 2018, hotels in the United States registered growth of 2.9% in profits per room in 2017.
Moreover, per a Cruise Lines International Association report, demand for cruises is going to witness significant growth in 2018 with 27.2 million passengers likely to set sail. In 2017, an estimated 25.8 million people went on cruise, increasing significantly from 24.7 million in 2017. Given that demand for cruising has increased almost 20.5% from 2011 to 2016, the industry is expected to grow in the days to come. The U.S. gambling and gaming industry too has grown significantly over the years. The number of casinos in the United States has gone up to 450 between 1998 and 2014.
Trade war fears coupled with speculation over a possible tech regulation following the Facebook data misuse scandal has certainly made investors jittery. Although recent comments from Xi Jinping have somewhat eased fears, the worries are far from over. This has resulted in markets bleeding.
Given this scenario, leisure stocks seem to be safe bets. Moreover, a steady industry growth coupled with bullish economic outlook, high wage growth and an upbeat consumer confidence make leisure stocks an ideal choice right now. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
Hilton Grand Vacations Inc. (HGV - Free Report) is engaged in hospitality business. It markets and operates vacation ownership resorts. Hiltonhas expected earnings growth of 43.7% for the current year. The Zacks Consensus Estimate for the current year has improved 32.2% over the last 60 days. Moreover, the stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Marriot Vacations Worldwide Corporation (VAC - Free Report) is a developer, marketer, seller and manager of vacation ownership resorts and vacation club, destination club and exchange programs, principally under the Marriott and Ritz-Carlton brands and trademarks.
Marriot has a Zacks Rank #1. The company has expected earnings growth of 20.1% for the current year. The Zacks Consensus Estimate for the current year has improved 13.0% over the last 60 days.
Bluegreen Vacations Corporation (BXG - Free Report) provides vacation ownership company. It markets, sells and manages timeshare resorts, urban destinations, clubs and residential lands. Bluegreen Vacations Corporation is based in Florida.
Bluegreen Vacations has a Zacks Rank #1. The company has expected earnings growth of 19.3% for the current year. The Zacks Consensus Estimate for the current year has improved 5.7% over the last 60 days.
Amaya Inc. (TSG - Free Report) engages in the design, development, manufacture, distribution and sale of technology based gaming products and services.
Amaya has a Zacks Rank #1. The company has expected earnings growth of 8.4% for the current year. The Zacks Consensus Estimate for the current year has improved 5.2% over the last 60 days.
RCI Hospitality Holdings, Inc. (RICK - Free Report) owns and operates adult nightclubs that offer live adult entertainment, restaurant and bar services.
RCI Hospitality has a Zacks Rank #2 (Buy). The company has expected earnings growth of 40.6% for the current year. The Zacks Consensus Estimate for the current year has improved 2.6% over the last 60 days.
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