Outdoor living is one of the largest sectors of the stock market. The United States spends over $800 billion every year on outdoor entertainment. To put that in context that spending number is on par with the financial services and insurance sector. And, it's almost double the spending in the pharmaceutical industry.
Stocks that focused on outdoor living surged during the pandemic because many Americans understood that being outside (albeit in a socially distanced fashion) was paramount to their physical and mental health. However, the sector didn't see a slowdown in 2021. And it looks like it will continue to be a strong sector in 2022. One reason for that is inflation. It's likely that travel budgets may be affected. But sunshine and fresh air are free.
But isn't this a lousy time to buy stocks? It could be. But it really comes down to being picky. Quality still matters and there are many quality names in this sector. And in this MarketBeat exclusive, we offer seven outdoor living stocks that are good buying opportunities because they lean into the larger macroeconomic picture.
Quick Links
- Lululemon
- Dick’s Sporting Goods
- Camping World
- Winnebago
- Home Depot
- Pool Corporation
- Callaway Golf
#1 - Lululemon (NASDAQ:LULU)
Look good, perform well. That’s the thesis behind buying shares of Lululemon (NASDAQ:LULU). Lululemon burst onto the national consciousness because of their yoga pants. However, the company is so much more than that. It’s an example of premium brands having the pricing power to pass along costs to their consumers.
This pricing power is at the core of my argument for LULU stock because there’s no doubt the stock is overvalued by fundamental metrics. However, every time analysts set a high bar, the athleisure manufacturer climbs over it. As long as it can deliver rising earnings and revenue, the stock price will be supported.
Unlike many of the outdoor living stocks in this presentation, Lululemon was up for the year until recently. However, even a quality stock like LULU has rolled over in the April sell-off. At the time of this writing, the stock is down about 8%. Based on the consensus opinion of analysts, it’s not likely to stay down for very long.
About Lululemon Athletica
Lululemon Athletica Inc, together with its subsidiaries, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. It offers pants, shorts, tops, and jackets for healthy lifestyle, such as yoga, running, training, and other activities. It also provides fitness-inspired accessories.
Read More - Current Price
- $253.50
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $416.26 (64.2% Upside)
#2 - Dick’s Sporting Goods (NYSE:DKS)
I’ll admit to a little double-dipping on this one. Dick’s Sporting Goods (NYSE:DKS) is not pure-play on outdoor living. Case in point, one of the catalysts for DKS stock in the past year has been the re-opening of youth sports.
But, Dick’s Sporting Goods is also a one-stop location for many of the clothing, equipment, and gear that individuals will use for their outdoor pursuits. And as the pandemic showed, Dick’s has built out its digital capabilities which is helping the company compete with Amazon (NASDAQ:AMZN) and other e-commerce retailers.
At the time of this writing, DKS stock is trading for nearly double its pre-pandemic level. However, the company is also delivering revenue and earnings that are well above pre-pandemic levels as well. With a price-to-earnings (P/E) ratio of right around 7 and a dividend with a yield that is comparable to its sector peers, Dick’s Sporting Goods looks like a compelling buy at this point.
About DICK'S Sporting Goods
DICK'S Sporting Goods, Inc, together with its subsidiaries, operates as an omni-channel sporting goods retailer primarily in the United States. The company provides hardlines, includes sporting goods equipment, fitness equipment, golf equipment, and fishing gear products; apparel; and footwear and accessories.
Read More - Current Price
- $209.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 10 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $237.09 (13.4% Upside)
#3 - Camping World (NYSE:CWH)
Back in February, MarketBeat contributor Thomas Hughes outlined the great buying opportunity that existed with Camping World (NYSE:CWH ) stock. Specifically, the stock was trading at less than 5x its earnings and had a dividend yield of over 8%.
At the time, Hughes cautioned investors that this deal wouldn’t last. The good news for investors is that to this point it still has. In fact, it’s gotten even better with a dividend yield that’s now above 9%.
Investors may be steering clear of CWH stock because the company delivered lackluster earnings in February. Earnings came in below expectations and revenue was only a slight beat. As a company that sells recreational vehicles (RVs), investors may believe that demand is falling. However, with many RV manufacturers reporting backlogs from the pandemic, it’s likely that Camping World will still deliver revenue and earnings growth in 2022.
About Camping World
Camping World Holdings, Inc, together its subsidiaries, retails recreational vehicles (RVs), and related products and services in the United States. It operates in two segments, Good Sam Services and Plans; and RV and Outdoor Retail. The company provides a portfolio of services, protection plans, products, and resources in the RV industry.
Read More - Current Price
- $22.51
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $26.88 (19.4% Upside)
#4 - Winnebago (NYSE:WGO)
Another play on the RV industry is Winnebago (NYSE:WGO). This stock is a bit of a mystery. It’s currently trading below its pre-pandemic levels despite the fact that earnings and revenue are well above early 2020 levels. And, unlike Camping World, Winnebago delivered a beat on both the top and bottom lines when it reported earnings in March.
As MarketBeat’s Jea Yu pointed out in April, there are two competing narratives fighting for investors’ attention. Recreational vehicle manufacturers are acutely affected by supply chain difficulties, rising interest rates, and high gas prices. On the other hand, the work-from-anywhere movement is showing no signs of abating, at least for now. And that means that many individuals will be looking to take their office on the road with them.
Is this sustainable? At this time it appears to be the case. This year may represent the high water mark for both revenue and earnings. However, even as that falls, both will still remain well above pre-pandemic levels which ads the long-term bullish case for WGO stock. WGO stock is looking undervalued at the moment with a P/E ratio of around 5.
About Winnebago Industries
Winnebago Industries, Inc manufactures and sells recreation vehicles and marine products primarily for use in leisure travel and outdoor recreation activities. The company operates through three segments: Towable RV, Motorhome RV, and Marine. It provides towable products that are non-motorized vehicles to be towed by automobiles, pickup trucks, SUVs, or vans for use as temporary living quarters for recreational travel, such as conventional travel trailers, fifth wheels, folding camper trailers, and truck campers under the Winnebago and Grand Design brand names.
Read More - Current Price
- $60.76
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $69.57 (14.5% Upside)
#5 - Home Depot (NYSE:HD)
Outdoor living means different things to different people. For some, it means spending time outdoors but a little closer to home. And that’s the argument for investing in Home Depot (NYSE:HD). Millions of dollars were spent as consumers updated their outdoor entertainment areas during the pandemic. And when trends like this start, they don’t end abruptly as the demand for outdoor televisions proves.
Now factor in the idea that new home construction and demand for new housing remain strong and you have the recipe for continued investment in outdoor living spaces. What could go wrong? Rising interest rates could price people out of the housing market. But for this summer, that doesn’t appear to be a concern.
Home Depot has mastered the omnichannel model and has somewhat of a moat from a company like Amazon that, for now, is not moving too aggressively into the home improvement area.
About Home Depot
The Home Depot, Inc operates as a home improvement retailer in the United States and internationally. It sells various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products. The company also offers installation services for flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, and windows.
Read More - Current Price
- $359.64
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $381.80 (6.2% Upside)
#6 - Pool Corporation (NASDAQ:POOL)
As its name suggests, Pool Corporation (NASDAQ:POOL) is a distributor of swimming pool supplies, equipment, and related leisure products in the United States and internationally. Not surprisingly, many homeowners decided a global pandemic was a good reason to install a pool or perhaps repair and/or redesign an existing pool. That means that in one way or another, they are probably customers of Pool Corporation.
I’ve heard from many pool owners that pools are often a money pit. But they’re one that most homeowners will continue to pay for year after year. That should give investors reason to believe that the revenue and earnings game for Pool Corporation will be sticky in the years to come.
And right now, investors can get shares of POOL stock near 52-week lows. This is a stock that does appear to be overvalued, but it has a growth forecast that suggests it can grow into its stock price over time.
About Pool
Pool Corporation distributes swimming pool supplies, equipment, and related leisure products in the United States and internationally. The company offers maintenance products, including chemicals, supplies, and pool accessories; repair and replacement parts for pool equipment, such as cleaners, filters, heaters, pumps, and lights; and building materials, such as concrete, plumbing and electrical components, functional and decorative pool surfaces, decking materials, tiles, hardscapes, and natural stones for pool installations and remodeling.
Read More - Current Price
- $371.82
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $347.22 (6.6% Downside)
#7 - Callaway Golf (NYSE:ELY)
The last stock on our list of outdoor living stocks is Callaway Gold (NYSE:ELY). Like many outdoor living stocks, ELY stock has fallen on hard times since hitting an all-time high in 2021. There are two catalysts that investors need to consider.
First, after nearly a decade of relatively flat revenue growth, the golf industry, in general, is in the middle of a renaissance. Some of that is due to individuals taking up or returning to the sport during the pandemic. And some of it has to do with the popularity of venues such as Top Golf which merge golf and entertainment in a more accessible way.
But the larger catalyst that I see is the migration of many Americans to more “appealing” locations. If you live in a northern state, you know that golf is not on your to-do list for several months of the year. If you move to a warmer location (Florida for example), you may now be looking to play golf year-round.
About Callaway Golf
Callaway Golf Company, together with its subsidiaries, designs, manufactures, and sells golf equipment, golf and lifestyle apparel, and other accessories. It operates through three segments: Topgolf; Golf Equipment; and Apparel, Gear and Other. The Topgolf segment operates Topgolf venues equipped with technology-enabled hitting bays, multiple bars, dining areas, and event spaces, as well as Toptracer ball-flight tracking technology used by independent driving ranges and broadcast television; and World Golf Tour digital golf game.
Read More - Current Price
- $0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
As you can see from this list, the category of outdoor living stocks is diverse. That can be both good and bad. It's good because investors have a lot of different names to choose from. It can be bad if you're a fund investor because it may give you exposure to some lackluster performers amidst some star performers.
That reality is being born out in the year-to-date performance of the category. Outdoor living stocks are down about 28%. While that doesn't inspire a lot of confidence, it's on par with work-from-home stocks that are down approximately 22%. More importantly, it's “less bad" than many other categories. For example, e-commerce stocks are down 56%, social media stocks are down 48%. Both of these categories were big pandemic winners as well.
So when viewed through that lens, outdoor living stocks are outperforming the broader market. So before you sell in May and go away, be sure to take a close look at this list of stocks that are likely to have a strong summer.
More Investing Slideshows:
