Don’t let the bumps scare you out. The stock market it is going much higher, asserts Tony Sagami, growth stock specialist and editor of Weiss Ultimate Portfolio.
Interest rates are at zero, the Fed is still spending $120 billion a month on quantitative easing, U.S. GDP is roaring back to life, corporate profits are back to pre-pandemic levels, America is rapidly approaching herd immunity and corporate America is buying its stock back in a big, big way.
As such, I have one new recommendation: MarineMax (HZO), which makes toys for the rich. If Thurston Howell was looking for a new yacht, I bet you’d find him at a MarineMax yacht store.
The top 1% of Americans own 30% of all household wealth in the U.S., while the bottom 50% of the population holds just 1.9%. And according to the Federal Reserve, the wealthiest 10% of Americans own 88% of all stocks.
That trend has been going on for a long time.
Over the past three decades, the top 10% of U.S. households have seen their wealth rise from 61% to 69%, while the total wealth controlled by the bottom 50% has been cut from 3.6% to 1.9%.
Those in the top 10% are using their increase in wealth to buy everything: vacation homes, couture fashion, luxury cars, recreational vehicles and, yes, even yachts.
MarineMax is the largest recreational boat and yacht retailer in the U.S. with over 100 stores. It sells both used and new pleasure boats and mega-yachts, and products are selling like hotcakes.
According to CEO William McGill, there is a “foundational shift of new customers embracing the boating lifestyle and many of our existing customers upgrading to larger and newer boats."
He’s right. Cooped up consumers are flocking to family friendly outdoor recreational activities because of the coronavirus pandemic.
As elevated as stock valuations are, MarineMax is selling for peanuts at only 10.9 times earnings. But MarineMax looks even cheaper if you factor in the $142.9 million, or $6.45 per share, of cash in the bank. If you back out that cash, the P/E drops to less than 10 times earnings. That’s cheap!
Normally, a stock that cheap is bleeding red ink, but MarineMax has a healthy, thriving business. MarineMax has grown its revenues at a 16% compounded rate of return over the last five years and expects to make $3.70 to $3.90 per share of profits in 2021.
Lastly, MarineMax owns a treasure trove of valuable waterfront real estate; 30 marinas that include restaurants, storage and service facilities.
The combination of deep value, foundational shift in demand for recreational boating, and a growing number of deep-pocketed consumers, is a winning trio of winds that will blow MarineMax’s stock even higher.
Best of all, MarineMax isn’t just COVID resistant — it’s a COVID winner.
