In this article, we will take a look at the 10 best summer stocks to buy now.
The COVID-19 pandemic caused the cancellation of summer vacation plans in 2020. Travel destinations worldwide had 1 billion fewer international visitors in 2020, which caused a direct impact on the booking, entertainment, airlines, cruises, and hotel stocks. The tourism and entertainment companies, including digital travel firm Expedia Group, Inc. (NASDAQ: EXPE), airline company Delta Air Lines, Inc. (NYSE: DAL), and Disneyland owner The Walt Disney Company (NYSE: DIS), experienced difficult times in 2020 and lost billions in revenues due to the coronavirus outbreak.
However, the mass rollouts of COVID-19 vaccines worldwide has investors hopeful for a strong recovery. According to a poll conducted by travel insurance company Allianz Partners USA, 67% of participants believe that getting the COVID-19 vaccine will make them feel comfortable enough to travel again this year. The widespread roll-out of vaccines also boosted the demand for international travel. More than three-quarters of global travelers would be more likely to fly abroad if they obtain the vaccine, according to a TripAdvisor, Inc. (NASDAQ: TRIP) report.
What Will Summer Vacation Look Like in 2021?
With vaccinations becoming more widely available, the travel industry is undergoing a massive transformation that continues to evolve as more Americans return to the road. According to TripAdvisor, Inc. (NASDAQ: TRIP), 67% of Americans expect to travel this summer, with 74% staying in the United States. The outdoor activities American families are eyeing this summer include beach day, socially distanced barbecue day, camping trip, and pool day.
According to Priceline.com, among the top destinations with tropical locales and warm weather that Americans are preparing to book their summer vacations at include Oahu in Hawaii, Orlando in Florida, Las Vegas in Nevada, and New Orleans in Louisiana. Priceline.com is an online travel agency owned and operated by Booking Holdings Inc. (NASDAQ: BKNG). Among the company’s travel-related services are hotel accommodation, plane tickets, rental cars, holiday packages, cruises, travel activities at consumer destinations, and travel insurance. In the first quarter of 2021, Booking Holdings Inc. (NASDAQ: BKNG) sold 3 million airline tickets, up from 2 million in the pre-COVID first quarter of 2019. BKNG is one of the best summer stocks to buy now.
Domestic travel is bound to surge this summer as more Americans opt to visit local attractions, with 70% of car rentals being used for road trips within their state, covering an average distance of 184 miles. With the rising tourism activities, New Jersey-based car rental company Avis Budget Group, Inc. (NASDAQ: CAR) is set to see growth. Avis Budget Group, Inc. (NASDAQ: CAR) took advantage of pricing opportunities as demand in the Americas began to rebound in the second half of the quarter and ended the first quarter with a 12% rise in sales per day. Avis Budget Group, Inc. (NASDAQ: CAR)’s revenue in the first quarter of 2021 was $1.37 billion. Over the past quarter, shares of Avis Budget Group have risen 90.17% and are up 525.8% in the last year. On the other hand, the S&P 500 has only moved 8.9% and 44.47%, respectively.
Expedia Group, Inc. (NASDAQ: EXPE) is another stock that is set to benefit from the travel boom. At the end of the fourth quarter, 76 hedge funds tracked by Insider Monkey reported owning stakes in the company, compared to 64 funds in the previous quarter. This sharp increase is a sign the smart money is loading up on Expedia Group, Inc. (NASDAQ: EXPE) to take benefit from the incoming recovery.
Just in time for summer travel, online homestay booking platform Airbnb, Inc. (NASDAQ: ABNB) launched its “Summer of Responsible Travel” plan as part of its commitment to fulfilling a safer travel experience for travelers. The company’s summer travel plan bans parties such as the 4th of July. Airbnb, Inc. (NASDAQ: ABNB) is up 3% year to date.
The Walt Disney Company (NYSE: DIS)
The Walt Disney Company (NYSE: DIS) preserved its magic even in the worst of the pandemic. After more than a year, Disneyland and Disney’s California Adventure in California recently opened on April 30. Under state health regulations, The Walt Disney Company’s theme parks can only handle 25% of their capacity, but this is a vital first step toward restoring revenue. The Walt Disney Company’s (NYSE: DIS) revenue came in at $16.2 billion in the first quarter of 2021. Disney Media and Entertainment segment accounted for $12.7 billion in revenues.
Just like the travel and entertainment industries, the hedge fund industry is also seeing winds of change. The entire hedge fund industry is feeling the repercussions of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26 2021, our monthly newsletter’s stock picks returned 197.2%, vs 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017, and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Photo by Mesut Kaya on Unsplash
With this context in mind, here is our list of the 10 best summer stocks to buy now.
Best Summer Stocks to Buy Now
10. Winnebago Industries, Inc. (NYSE: WGO)
Number of Hedge Fund Holders: 27
We start our list of 10 best summer stocks to buy now with recreational vehicle producer Winnebago Industries, Inc. (NYSE: WGO). The company, headquartered in Forest City, Iowa, manufactures motorhome and outdoor lifestyle products under Grand Design, Chris-Craft, and Winnebago. Winnebago Industries, Inc. (NYSE: WGO) produces high-quality RVs, travel trailers, fifth-wheel products, and boats.
The company has a market cap of $2.7 billion. Winnebago Industries, Inc. (NYSE: WGO)’s revenue came in at $840 million in the second quarter of 2021. Sales rose by 34%, owing to increased consumer demand in both the towable and motorhome segments. Shares of WGO jumped 71% over the past twelve months. On March 25, Truist Securities analysts maintained their Buy rating on Winnebago Industries, Inc., with a $95 price target.
Like Expedia Group, Inc. (NASDAQ: EXPE), WGO is one of the best summer stocks to invest in now.
There were 27 hedge funds that reported owning stakes in Winnebago Industries, Inc. (NYSE: WGO) at the end of the fourth quarter. The total value of these stakes at the end of Q4 is $311 million.
9. Avis Budget Group, Inc. (NASDAQ: CAR)
Number of Hedge Fund Holders: 28
American car rental firm Avis Budget Group, Inc. (NASDAQ: CAR) ranks 9th in our list of 10 best summer stocks to buy now. As American families plan to spent summer 2021 outside, the car rental company gains its momentum. Avis Budget Group, Inc. (NASDAQ: CAR) offers car rentals and car-sharing services. In the first quarter, Avis Budget recorded a 12% increase in revenue per day in the US, and these positive pricing trends have primarily carried into the second quarter.
The company has a market cap of $5.6 billion. The company’s revenue in the first quarter fell 22% year over year to $1.37 billion. Revenues improved sequentially in the quarter, with sales per day in the Americas rising by 12% as demand strengthened. Shares of CAR surged 525.8% over the past twelve months. On May 5, Morgan Stanley kept its equal-weight rating on Avis Budget Group, Inc. (NASDAQ: CAR) and raised its price target to $73 per share.
There were 28 hedge funds that reported owning stakes in Avis Budget Group, Inc. (NASDAQ: CAR) at the end of the fourth quarter. The total value of these stakes at the end of Q4 is $1.05 billion.
8. Hilton Grand Vacations Inc. (NYSE: HGV)
Number of Hedge Fund Holders: 31
Franchise resort and hotel operator Hilton Grand Vacations Inc. (NYSE: HGV) ranks 8th on the list of the best summer stocks to buy now. The Orlando-based timeshare property company is a subsidiary of Hilton Worldwide Holdings Inc. (NYSE: HLT). Hilton Grand Vacations Inc. sells vacation ownership intervals, manages resorts, operates a points-based vacation club, and finances and services loans provided to consumers for their timeshare purchases. Hilton Worldwide Holdings Inc. (NYSE: HLT)’s luxurious vacation resort and hotel properties are primarily located in some of the most popular summer spots in the US, including Hawaii, New York, South Carolina, and Florida. Hilton Grand Vacations Inc. also operates in Mexico and Barbados.
The company has a market cap of $3.7 billion and total revenues of $235 million in the first quarter. Shares of HGV increased 149% over the past twelve months.
There were 31 hedge funds that reported owning stakes in Hilton Grand Vacations Inc. (NYSE: HGV) at the end of the fourth quarter. The total value of these stakes at the end of Q4 is $759 million.
7. Pool Corporation (NASDAQ: POOL)
Number of Hedge Fund Holders: 33
Louisiana-based swimming pool supplies distributor Pool Corporation (NASDAQ: POOL) ranks 7th in our list of 10 best summer stocks to buy now. With over 395 locations worldwide, the company offers swimming pool appliances, parts and accessories, and related outdoor living items. The company also sells grills, hot tubs, and components for outdoor kitchens.
The company has a market cap of $17.5 billion and net sales of $1.06 billion in the first quarter. Shares of POOL increased 99% over the past twelve months. In April, Loop Capital analyst Garik Shmois analyst lifted his price target to $405 while keeping his Buy rating on Pool Corporation (NASDAQ: POOL).
There were 33 hedge funds that reported owning stakes in Pool Corporation (NASDAQ: POOL) at the end of the fourth quarter. The total value of these stakes at the end of Q4 is $871 million.
6. Delta Air Lines, Inc. (NYSE: DAL)
Number of Hedge Fund Holders: 58
American airline giant Delta Air Lines, Inc. (NYSE: DAL) ranks 6th in our list of the best summer stocks to buy now. The Atlanta-based company flies over 1,000 planes and operates hundreds of international destinations, including Mexico City, Amsterdam, London-Heathrow, and Seoul-Incheon.
The company has a market cap of $28.7 billion. The company’s revenue came in at $17 billion in 2020, down from more than $40 billion in 2019. The company remains optimistic about its decision to extend its aircraft seat selection to premium economy seating, predicting that as international leisure travel demand recovers over the next year or two, this upgrade will result in a surge in demand for Delta Air Lines, Inc. (NYSE: DAL)’s premium seat upgrade.
Like Airbnb, Inc. (NASDAQ: ABNB), The Walt Disney Company (NYSE: DIS), Booking Holdings Inc. (NASDAQ: BKNG), DAL is one of the best summer stocks to buy in 2021.
There were 58 hedge funds that reported owning stakes in Delta Air Lines, Inc. (NYSE: DAL) at the end of the fourth quarter, up from 43 funds a quarter earlier. The total value of these stakes at the end of Q4 is $1.06 billion.
5. McDonald’s Corporation (NYSE: MCD)
Number of Hedge Fund Holders: 62
Fast-food behemoth McDonald’s Corporation (NYSE: MCD) ranks 5th in our list of 10 best summer stocks to buy now. The Chicago-based fast-food firm operates nearly 40,000 McDonald’s in over 119 markets globally. MCD stock has been on a full-fledged rally and gained 10.5% in the last 3 months, after remaining dormant for the first quarter of this year. McDonald’s Corporation is one of the restaurants that will prosper this summer as more people go out to eat now that the lockdown in several states and countries has been lifted.
The company has a market cap of $175 billion and total revenues of $5.12 billion in the first quarter of 2021, up 9% year over year. McDonald’s Corporation pays an annual dividend of $5.16 per share with a 2.2% dividend yield. On May 4, Telsey Advisory Group analysts maintain their Outperform rating on McDonald’s Corporation, with a $260 price target. The stock closed at $234.8 per share on May 7.
There were 62 hedge funds that reported owning stakes in McDonald’s Corporation (NYSE: MCD) at the end of the fourth quarter. The total value of these stakes at the end of Q4 is $2.89 billion.
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4. Airbnb, Inc. (NASDAQ: ABNB)
Number of Hedge Fund Holders: 68
Home rental platform Airbnb, Inc. (NASDAQ: ABNB) ranks 4th in our list of the best summer stocks to buy now. The travel platform went public at the end of 2020, and its stock has risen 22% from its initial public offering price of $146 per share. The company now has a market cap of $93.4 billion. Airbnb currently has 4 million hosts in 200 countries that have hosted 800 million guests, and the company is trying to attract millions more to meet potential demand.
The company’s revenue in the fourth quarter of 2020 was $859 million, easily exceeding analysts’ expectations of $748 million, and full-year revenues were just down 30% to $3.4 billion compared to 2019. Needham analysts initiate coverage of Airbnb, Inc. with a Buy rating and a $210 price target.
There were 68 hedge funds that reported owning stakes in Airbnb, Inc. (NASDAQ: ABNB) at the end of the fourth quarter. The total value of these stakes at the end of Q4 is $1.61 billion.
Blue Hawk Investment Group said that Airbnb, Inc. has a desirable growth profile due to its charismatic position in the travel ecosystem in its Q4 2020 investor letter:
“We typically avoid new issues, with ABNB being a rare exception. ABNB fits right into our wheelhouse as a leader in a promising industry, with a disruptive business model, unique company culture, massive addressable market, and a name synonymous with a category (“got an Airbnb for the weekend”). Towards the end of the year, the narrative of the hot IPO/SPAC environment we found to be fitting, with an exception. We believe grouping ABNB into this category is a mistake. The IPO was botched, but the mistake was the initial offering price being far too low in this case. We believe the reason for this initial mispricing was the proximity of the IPO to the vaccine effectiveness data release. The data turned out to be much better than anticipated, a blue-sky result, causing a drastic change in the outlook for travel and lodging, the industry in which ABNB operates. Bayes Theorem in action, people typically have a bias when incorporating new information, in that they do not adjust their view as quickly as they should, and the vaccine data release required an almost complete reversal of views.
Back to the company, we started buying on day one and continued to build a position into the $120s and $130s. A founder-led firm, we believe the company has an excellent management team, a very attractive growth profile with many levers at their disposal, and embedded optionality due to their attractive position in the travel ecosystem (and minimal reliance on Google). The most underappreciated aspect of the story is the attractiveness of the financial model. Not many IPOs come along that get us excited, but we believe the future is bright for this young company. We will reveal more details about our thesis in future letters.”
tanuha2001/Shutterstock.com
3. Expedia Group, Inc. (NASDAQ: EXPE)
Number of Hedge Fund Holders: 76
Online travel firm Expedia Group, Inc. (NASDAQ: EXPE) is placed 3rd in our list of 10 best summer stocks to buy now. The Seattle-based travel retail company offers vacation rentals and travel bundles through Expedia.com, Hotels.com, and Vrbo.com, and Trivago.com. Expedia Group, Inc. also provides car rental services through CarRentals.com.
The company has a market cap of $24.5 billion and total revenues of $1.25 billion in the first quarter of 2021. On May 7, BTIG Research analysts maintained their Buy rating on Expedia Group, Inc., with a $210 price target. Shares of EXPE surged 150% over the past twelve months.
There were 76 hedge funds that reported owning stakes in Expedia Group, Inc. (NASDAQ: EXPE) at the end of the fourth quarter, up from 64 funds a quarter earlier. The total value of these stakes at the end of Q4 is $6.6 billion.
2. Booking Holdings Inc. (NASDAQ: BKNG)
Number of Hedge Fund Holders: 108
Travel and restaurant online reservation platform Booking Holdings Inc. (NASDAQ: BKNG) ranks 2nd in our list of the 10 best summer stocks to buy now. The digital booking company was founded in 1997 in Norwalk, Connecticut. The company operates Booking.com, which offers online reservation services to various travel destinations worldwide and features travel bundles that include accommodation and air and land transfers. Booking Holdings Inc. also operates other online travel and car rental services, namely Agoda, Priceline, KAYAK, and RentalCars.com.
The company has a market cap of over $95 billion. In the first quarter of 2021, the company’s revenue was $1.14 billion. The company’s cash balance jumped to over $12 billion from $10.5 billion in December 2020. On May 6, Barclays kept a buy rating on Booking Holdings and raised the price target to $2,740. Shares of BKNG increased 63% over the past twelve months.
There were 108 hedge funds that reported owning stakes in Booking Holdings Inc. (NASDAQ: BKNG) at the end of the fourth quarter, up from 64 funds a quarter earlier. The total value of these stakes at the end of Q4 is $8.24 billion.
Image by Edeltravel_ from Pixabay
1. The Walt Disney Company (NYSE: DIS)
Number of Hedge Fund Holders: 144
Topping the 10 best summer stocks list to buy now is American entertainment giant The Walt Disney Company (NYSE: DIS). When it comes to the best summer stocks to invest in, Disney is perhaps one of the most popular companies with pent-up demand, as the company’s theme parks and resorts in California recently reopened. On top of that, The Walt Disney Company is also making a dent in the streaming industry with its booming Disney+ video streaming business. Since its launch in 2019, Disney+ has already surpassed 100 million subscribers. According to Disney, its streaming service user base will be between 230 million and 260 million by 2024.
The company has a market cap of over $335 billion. The Walt Disney Company’s revenue came in at $16.2 billion in the first quarter of 2021. The stock has gained 69% in the last twelve months. Wells Fargo maintained an Overweight position in Walt Disney and raised its price target to $219 on April 20.
There were 144 hedge funds that reported owning stakes in The Walt Disney Company (NYSE: DIS) at the end of the fourth quarter, up from 112 funds a quarter earlier. The total value of these stakes at the end of Q4 is $16.4 billion.
New Jersey-based investment management firm Harding Loevner Lp said that The Walt Disney Company strengthened its direct customer engagement, which helped the company harvest a substantial return of insights used to customize offerings on a large scale in its Q4 2020 investor letter:
“One of the original constituents of the Nifty Fifty holds a place in our portfolio today. When we bought Disney three years ago, we wrote that ‘we view Disney theme parks in the US, Europe, and China as resistant to online substitution.’ We did not reckon on a pandemic, which closed all of them, and sent us to our couches. Disney, however, was ready for us, brilliantly illustrating the importance of management foresight and change management. Or, as Louis Pasteur said, “chance favors the prepared mind.”
A century after its founding in 1923, Disney is in the middle of a bold shift from its legacy media networks & entertainment model—with cable TV, theme parks, and theater films dominating its earnings—to a direct-to-consumer streaming media model. The keys to Disney’s transition: matchless storytelling, coupled with financial strength. The company reliably creates content that people all over the world are eager to consume. It also hastened spending on original content to attract subscribers to its new streaming platform. These factors have allowed Disney to weather the pandemic, having expanded its direct engagement with customers. Such connections yield a rich harvest of insights used to customize offerings on a mass scale, reinforcing that engagement in a virtuous circle and thereby raising the lifetime value of each customer. Subscribers to Disney+ reached 86.8 million one year after launch, compared to the 60 – 90 million management projected to reach in 2024. To be sure, Netflix, Apple, and Amazon remain formidable competitors in new-era streaming entertainment (mind what we said about everyone standing up at once), but there’s fight left in this old dog.”
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Disclosure: None. 10 Best Summer Stocks To Buy Now is originally published on Insider Monkey.
