9 Vacation Stocks to Buy for a Summer Boost

Vacations are the ultimate consumer discretionary expense.

Nine years of economic expansion does wonders for consumer discretionary spending, and with the start of summer just around the corner, Americans have something they didn’t during the Great Recession — money for vacations. Even businesses seem more inclined to spend on travel. The financial health of businesses and consumers and how easily they can tap credit have an overriding influence on vacation-related stocks, says Carin Pai, executive vice president and director of equity management for Fiduciary Trust Co. International. Because the economy is expected to have another good year, vacation stocks, like the ones that follow, should continue to gain, too.

Spirit Airlines Inc. (ticker: SAVE)

Bargain airline Spirit is a top choice for Heartland Funds CEO Will Nasgovitz and portfolio manager Colin McWey. They like the carrier’s strategy and cost structure. Ultra low-cost carriers like Spirit are just getting a toehold in the U.S., and if Europe is an example, the budget airline should grow. As legacy carriers pull out of second-tier cities like Milwaukee, Spirit and other budget carriers have room to expand, which could stimulate demand with low- and middle-income consumers, Nasgovitz and McWey say. Spirit is also a value stock, trading around 10 times 12-month earnings.

Brunswick Corp. (BC)

Best known for its boating and marine business, Brunswick also has a fitness business, which includes billiard tables and equipment for home and commercial gyms. Earlier this year, the company announced it would spin off its fitness business to concentrate on boating and marine, which Nasgovitz and McWey say is a good decision, one that will benefit both Brunswick and the new company. Brunswick also sold off its less profitable boating names and is a leaner business now. As a result, “you have a one-of-a-kind marine business that is really the crown jewel for this company,” McWey says.

Royal Caribbean Cruises Ltd. (RCL)

John Person, president of Persons Planet, an advisory company and investment newsletter publisher, is a fan of cruise lines in general, particularly Royal Caribbean. He notes the line just launched the world’s largest cruise ship, Symphony of the Seas, which can accommodate more than 5,500 people. Even with the bigger ship’s greater capacity, Royal Caribbean’s bookings are strong, Person says. “Royal Caribbean has a pretty solid model, and they’ve got a rewards program,” he says, adding that for value-oriented travelers, cruises are an exceptionally good deal.

MGM Resorts International (MGM)

Investors snubbed MGM Resorts after first-quarter earnings reflected softer revenue from weak room rates in Las Vegas, but Person considers the casino operator a long-term holding. For one thing, the stock has recovered before, most notably after the Las Vegas shooter used MGM’s Mandalay Bay resort as his base. Plus, MGM just opened a casino outside of Washington and another in Macau. The Detroit property is still one of its highest revenue-generating profit centers, Person says. MGM properties also generate revenue by hosting a number of high-profile entertainment events, such as the Country Music Awards at the MGM Grand in April; MGM’s Grand Garden Arena will host the Billboard Music Awards in May.

Mastercard Inc. (MA)

With its 30 percent-plus profit margins and a return on assets in excess of 20 percent, Mastercard has a lot to like, says Albert Meyer, founder of Bastiat Capital. That return is high because Mastercard doesn’t have capital-intensive assets like inventory, plants or machinery. Insiders also own 11 percent of the company, another plus. “When insiders own a lot, they’re not so keen to give out stock to employees because they understand the dilutive effect,” he says. Also, the company’s cash on hand exceeds its debt, and Mastercard’s payout ratio is only 18 percent, something Meyer approves of because the dividend can still grow, even if there’s an earnings miss.

Marriott International Inc. (MAR)

As a travel essential, hotel chains like Marriott should get a boost from millennials, given their preference to spend money on experiences instead of products, says Kristen Perleberg, senior analyst at the Leuthold Group. Marriott, she says, has long-term growth prospects and a price-earnings ratio of 25, similar to the broader Standard & Poor’s 500 index. The hotel chain rates highly on customer satisfaction surveys, helping it attract repeat business, notes Josh Blechman, director of capital markets at Exponential ETFs. Meanwhile, a weaker U.S. dollar encourages more foreigners to come to the U.S. while keeping more vacationing Americans stateside. That’s important, Perleberg says, because many hotels still derive most of their revenue domestically.

Phillips 66 (PSX)

The summer driving season is upon us, kicking oil refiners into high gear. Goldman Sachs energy analysts say refiners have attractive fundamentals, noting that strong global demand and loosening U.S. regulations for the renewable fuel standard should benefit refineries. Phillips 66 is also entering a period of low capital spending, which should boost free cash flow, the analysts say. They view Phillips 66 as both a refiner and a Big Oil member, just one with a better growth profile. The company is also expected to pursue dividend growth and share repurchases, both considered positive for prices. PSX’s current dividend yield is 2.5 percent.

Expedia Group Inc. (EXPE)

The online booking industry has seen a lot of consolidation, with Expedia a key beneficiary. It owns 17 of these companies, including Orbitz and Travelocity. These smaller names, like Orbitz, have more satisfied customers. Orbitz ranks near the top in consumer satisfaction surveys, Blechman says, as customers feel it has a wider variety of travel options. Ultimately, this benefits Expedia. Although Expedia has a high P/E ratio of 47, the stock trades close to the bottom of its 52-week average. Of 18 analysts covering the stock, 15 rate it as a “buy” or “strong buy,” according to Nasdaq.

The Walt Disney Co. (DIS)

Disney is involved in many facets of entertainment, from theme parks to film to its highly profitable cruise lines. Opinion, however, is mixed on whether Disney is worth buying now. Of the 15 analysts covering the stock, seven consider it a “buy” or “strong buy,” and eight rate it a “hold,” according to Nasdaq. Person is one of the skeptics. Although he likes the stock as a long-term holding, he thinks it may be overvalued now. “I feel like it’s susceptible for a downside move in the near term,” Person says. He believes investors should have a better opportunity to buy it down the road.