Figuring out which stocks to buy is hard, but perhaps harder still is figuring out when it's a smart time to buy them. Fortunately, our Motley Fool investors are here to help. We asked three of them for a savvy stock pick that they wouldn't wait on, and they came back with National Beverage (NASDAQ: FIZZ), Vail Resorts (NYSE: MTN), and Travelers Companies (NYSE: TRV). There are compelling reasons why you might want to add each of them to your portfolio; read on to find out if they're right for you.
Bubbling stock returns
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Demitri Kalogeropoulos (National Beverage): It might seem crazy that investors have pushed National Beverage stock up more 100% so far this year after the carbonated beverage specialist trounced the market in 2016. But its gains are grounded in some impressive operating wins.
For one thing, sales are up 18% over the past twelve months, and surging demand for its La Croix sparkling water has given the company room to boost prices in an otherwise slow-growing industry. The combination of those two powerful trends sent National Beverage's net income up nearly 60% this year, and its operating margin has now passed that of slumping giant Coca-Cola.
National Beverage is determined to send a big chunk of its earnings growth back to shareholders, and toward that end, it just issued a $1.50 per share special dividend. But smart investors are more excited about its long-term potential to use its brand portfolio -- which is focused on non-cola drinks -- to soak up market share. In the fiscal year ahead, National Beverage expects to ramp up its distribution of its Shasta brand; success there would give it an even stronger position in the booming market for canned carbonated beverages.
Let it snow
Dan Caplinger (Vail Resorts): Winter is coming, and that's great news for the ski resort industry. Vail Resorts has been one of the fastest-growing companies in the business, with a long-held and extensive network of resorts to which it has recently made additions that give it a worldwide footprint. As its name suggests, the company has an extensive presence in Colorado, but it has also focused on the Lake Tahoe area.
Big acquisitions have expanded Vail Resorts dramatically, starting with the purchases of resorts in Park City, Utah, in 2014 and Australia in 2015, before inking a deal for Whistler Blackcomb in British Columbia -- arguably North America's largest ski resort -- last year. The move has made Vail's season passes more valuable, especially those that allow winter sports enthusiasts to visit any resort under the company's umbrella. Vail Resorts has also looked east, with its acquisition of Stowe in Vermont setting up the company for a wider presence in the U.S. as well.
Investors have already recognized the value of these moves, and Vail Resorts stock has posted big gains. Nevertheless, many observers believe that the ski resort specialist will keep capitalizing on the demand for high-value experiences, and the beneficial network effect from its strategic acquisitions should make Vail Resorts the premier name in the industry.
Todd Campbell (Travelers Companies): Property and casualty insurers will pay out more in claims than they collect in premiums this year because of Hurricanes Harvey, Irma, and Maria, but savvy investors are looking beyond that short-term pain to the long-term reward that's likely to come from rising premiums and greater post-storm demand for coverage.
I previously outlined in greater detail why I think investors should consider buying Travelers, the second-largest property and casualty insurer in the U.S., but to paraphrase: The negative impact of past storms, including Hurricane Katrina, has been short lived while the positive impact of pricing strength and demand growth has been long lived. As a result, Travelers shareholders have been handsomely rewarded.
This season's hurricanes will likely cause the company's combined ratio (the percentage of premium revenues spent on claims) to exceed 100%, but Travelers' has deep pockets. On Sept. 11, management estimated its after-tax exposure to Hurricane Harvey will be between $245 million to $490 million, and while that's a lot of money, investors should bear in mind that Travelers spent over $300 million on buybacks alone this quarter before halting them because of these storms.
Overall, thinking short term when it comes to property and casualty insurers might not be the smartest bet; that's why I think investors should be looking at this stock as a long-term buy now.
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Dan Caplinger has no position in any of the stocks mentioned. Demitrios Kalogeropoulos has no position in any of the stocks mentioned. Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool recommends Vail Resorts. The Motley Fool has a disclosure policy.
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