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Six Flags Entertainment Corp (SIX), Coach, Inc. (COH), Cinemark Holdings, Inc. (CNK): Top Three Consumer Discretionary Ideas

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With a growing economy (the IMF expects the US economy to grow by 3% in 2014) and unemployment heading south, the consumer discretionary space should outperform the market going forward. Here I will make a short recap of my top three consumer discretionary ideas. This three companies are growing their top-lines with a strong focus on margin expansion. My bet is that they should be returning money to shareholders at an increasing level.  Let’s take a look!

Ready to distribute more cash

Six Flags Entertainment Corp (NYSE:SIX)
Six Flags Entertainment Corp (NYSE:SIX) is the world’s largest regional theme park operator. The company counts 17 locations in the US, one in Canada and one in Mexico. In 2009, a huge debt pile and lower park attendance forced Six Flags Entertainment Corp (NYSE:SIX) to file Chapter 11.
That said, the company emerged from bankruptcy in 2010 with a delevered balance sheet. Under new management, led by turnaround specialist James Reid-Anderson, the company is ameliorating fast. I believe management’s 2015 plan of achieving $500 million in modified EBITDA with capital expenditures well below depreciation is doable. If the plan is fulfilled, it could translate to $6 per share in free (and distributable) cash flow.
Meanwhile everything is going according to plan. With its top line expected to grow by 4% year-over-year, or YOY, and its EBITDA margin expected to increase to 39.7%, I believe Six Flags Entertainment Corp (NYSE:SIX) looks like a compelling story. The company trades at 2013 12.8 times EV/EBITDA and pays a 5.1% cash dividend yield.

Luxury trading at fair prices

Coach, Inc. (NYSE:COH) is one of the very few luxury goods companies that (1) Is growing its top-line fast in emerging countries and (2) Is selling for good price. It’s currently trading at 2013 8.7 times EV/EBITDA, 15.2 times P/E, and paying a 2.35% cash dividend yield.

Besides, Coach, Inc. (NYSE:COH) showed that efforts to stabilize its North America business, where sales surged by 7% YOY, are being successful. North America store comps (the most important performance figure in retail) were up 1%, and wholesale declines moderated. Better yet, margin performance was solid, and international markets continued to perform beautifully. In China, a key market, sales were up by 40% and store comps were up by mid-double digits. Good signs didn’t end there, the company trusts its brand and announced the acquisition of its European Joint Venture, which operates 18 stores.

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