Leisure and recreational stocks tend to outperform following yield curve inversion, says Baird’s Craig Kennison. Yield on the U.S. 2-year Treasury surpassed the one on 10-year today.
Kennison likes Brunswick Corporation
Kennison recommends owning companies with strong balance sheet and a solid buyback programme in this environment. One such name that pops out to him is Brunswick Corporation (NYSE: BC). On CNBC’s “Power Lunch”, he said:
In 2025, their plan is to earn $16 to $17.50. But their downside scenario is they might earn just $6.0 if the market were to correct by 40%. Right now, we’re essentially trading at twelve to thirteen times Armageddon in their scenario. That’s good value.
The senior research analyst couples a price target of $120 on BC that represents a 50% upside from here. The company had its investor day about a month ago.
What else does he like in recreational stocks?
Another name that he likes in the recreational space is Winnebago Industries Inc (NYSE: WGO) down nearly 30% for the year. Making a bull case for the hard-hit stock on CNBC, Kennison said:
Very high-quality company, made number of smart acquisitions. They’re taking share dramatically. Our scenario suggests Winnebago can earn up to $8.0, which is much below what they’re going to do this year. But in that scenario, it’s trading at 8 times; very inexpensive.
He sees a 50% upside in Winnebago as well. Just over a week ago, the American manufacturer of motorhomes reported market-beating results for its fiscal second quarter.
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