Bank of America shares 9 stocks to buy as the pandemic prompts consumers to shift their spending habits towards 'solitary leisure' activities like golf and biking

  • Consumers have been shifting their buying habits since the coronavirus outbreak started. 
  • They went from spending their money on traditional entertainment to “solitary leisure” activities.
  • BofA recommends buying nine leisure names that can still run higher. 
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Consumers have been shifting their buying habits since the coronavirus outbreak started. 

They went from spending their money on traditional entertainment like amusement parks and gyms towards activities that are better suited to social distancing guidelines. 

The continued demand for outdoor lifestyle activities captured Bank of America’s interest. They analyzed their credit and debit card data, and looked at discretionary spending numbers.

Within that, they grouped restaurants, travel, live entertainment, and leisure spending into the “experiences” category and placed material goods like apparel, home furnishings, and jewelry under “stuff.”

As the pandemic swept through the world, overall spending on experiences fell 29% from 2019 levels, with travel and live entertainment taking the worst hit, Shaun Kelley, a research analyst at the bank, wrote in a Feb. 8 note. 

However, his team found that their leisure spending subcategory suffered a lesser decline of 17%. “Solitary leisure” categories that encourage social distancing including bikes, boating, sporting goods, and golf on average rose by around 4% year-on-year from 2019. The increase happened even as spending on other experiences like cruises, gyms, and theme parks stumbled 67% during the same period. 

A Feb 5. Google dataset that tracks visits to places like grocery stores and parks showed that traffic to traditional entertainment sites remained lower than usual. Across the US, visits to places like restaurants, shopping centers, theme parks, and movie theaters were down 24% from the baseline, the baseline being the median value from Jan 3. to Feb. 6.

Still, Bank of America is bullish on companies that provide so-called solitary leisure during the pandemic, and named nine stock picks that should continue to benefit. In addition to their social-distancing advantage, these stocks should benefit from a broader shift in spending on experiences over stuff. 

“We see this shift as a mega trend, as the consumer has shifted ~1,000bps (from 57% to 66%) of its wallet or $240B annually to Experiences in the last 20 years,” Kelley wrote. “We think this is driven by a number of tailwinds including demographics (Z’ers and Boomers), shifting tastes and preferences (bye handbags, hello Hawaii!) and by social media reinforcement (post it, hashtag it).”

We listed the nine stocks below in no particular order and included analyst commentary, where available, from the note.

1. Nike

Ticker: NKE

Market Cap: $221.5 billion

Comment: “We believe Nike should continue to gain share within the global casual apparel & footwear markets globally.”

Source: Bank of America

2. Lululemon

Ticker: LULU

Market Cap: $44.05 billion

Comment: “We believe a premium to LULU’s peer group average of high-growth consumer companies (roughly 20-23x) is justified given LULU’s relatively stronger growth prospects including a productive US rollout, rapid e-commerce growth, and international expansion.”

Source: Bank of America

3. Deckers Outdoor

Ticker: DECK

Market Cap: $9.2 billion

Comment: “Our $380 price objective is based on 25x our F2023E EPS of $15.20, a 25% premium to DECK’s historical valuation given its stronger than average revenue growth due to HOKA’s rising brand awareness, but at the low-end of global athletic / outdoor footwear and apparel vendors (19-40x) due to a more moderate growth outlook for the UGG brand compared to less mature peers.”

Source: Bank of America

 

4. Dicks Sporting Goods

Ticker: DKS

Market Cap: $6.5 billion

Comment: “DKS continues to benefit from the shift to Solitary Leisure activities as well as our outlook for improving footwear allocations.”

Source: Bank of America

 

5. Yeti

Ticker: YETI

Market Cap: $6.24 billion

Source: Bank of America

6. Foot Locker

Ticker: FL

Market Cap: $5.15 billion

Source: Bank of America

7. Academy Sports & Outdoors

Ticker: ASO

Market Cap: $2.24 billion

Comment: “Academy’s long-term EPS CAGR is in line to slightly above Athletic/Sporting Goods Retail group avg. of 13% (& we see significant earnings upside relative to conservative projections). Academy offers a broad range of high demand “Solitary Leisure” merchandise” 

Source: Bank of America

8. Hibbet Sports

Ticker: HIBB

Market Cap: $1.06 billion

Source: Bank of America

9. Shimano

Ticker: SHMDF

Market Cap: $21.53 billion

Source: Bank of America

Get the latest Bank of America stock price here.

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