Time to Buy? These 3 Leisure Stocks Hit 52-Week Lows on Tuesday

Tuesday trading saw 137 NYSE stocks hit 52-week highs and just 27 hit 52-week lows. Over on the Nasdaq, the 52-week lows outdid the highs, 97 to 80. Overall, there were 224 52-week highs and 127 52-week lows. 

One completely lopsided area was ETFs, where the 52-week highs outdid the lows 268 to 16. However, the list of funds is way too esoteric for my liking. 

The 52-week lows on the NYSE yesterday show some interesting stock picks for aggressive investors. 

Here are three I’d consider to buy for an eventual rebound. 

Dine Brands Global

Dine Brands Global (DIN) hit its 39th 52-week low of the past year on Tuesday. It closed at $41.55, its lowest point since July 2020.  

Dine Brands has three restaurant concepts: Applebee’s, IHOP, and Fuzzy’s Taco Shop. Its parent company has had many different names over the years. The latest name change was in February 2018, going from DineEquity to Dine Brands Global. 

The change happened as part of a company-wide transformation to focus on the individual brands and a global expansion. As part of this transformation, it would close many stores at both Applebee’s and IHOP. 

In February 2018, it had approximately 1,936 Applebee’s franchised locations and 1,786 IHOP franchised and area licensed restaurants. Today, it has 1,642 Applebee’s, 1,814 IHOP’s, and 131 Fuzzy’s Taco Shops, which it acquired in December 2022 for $80 million. It was the company’s first acquisition since Applebee’s in 2007. 

Why has DINE lost 37% of its value over the past year? Poor sales is the quick answer. 

On May 8, it reported Q1 2024 results that saw same-store sales declines from all three concepts: Applebee’s domestic comps declined 4.6%, IHOP’s were down 1.7%, and Fuzzy’s same-store sales were down nearly 10% year-over-year. 

Importantly, however, it did generate $19.9 million in adjusted net income in the first quarter -- down from $30.2 million a year earlier -- with adjusted free cash flow of $29.7 million, 14x higher than in Q1 2023. 

Further, it reiterated guidance for 2024 of 1% same-store sales growth at the midpoint, with healthy comps from IHOP of 2%. 

Based on a trailing 12-month free cash flow of $121 million, its free cash flow yield is 5.8%. Anything between 4% and 8% is a reasonable price. 

Check out the June 21 $50 call with an ask price of $0.15, a 0.30% down payment on DINE shares. 

Brown-Forman 

Brown-Forman  (BF.B) hit its 28th 52-week low of the past year yesterday, closing at $82.23, its lowest point since May 2020.

The maker of Jack Daniel’s Tennessee Whiskey is in the middle of a downtrend in the spirits business. Its shares are off nearly 27% in the past 52 weeks. Diageo (DEO), one of the world’s largest liquor companies, is down more than 21% over the past year. Over the past five years, the Kentucky company’s shares are down about 9%, nearly half the losses experienced by Johnnie Walker’s parent company.

While JD is the most significant part of its business, it owns over 40 brands, including Woodford Reserve bourbon, Benriach Scotch, Herradura tequila, Diplomático rum, and Korbel California Champagne. 

In business for over 150 years, the company, although public, remains a family-controlled business. To help the Brown family member shareholders remain engaged with the business, the company created the Brown-Forman/Brown Family Shareholders Committee in 2007. 

“It provides a forum for frequent, open, and constructive dialogue between Brown-Forman and its controlling family stockholders in accordance with all applicable laws and regulations,” states the 2023 proxy. 

“In addition, the committee engages the Brown family on topics of mutual interest, such as the company and our industry, governance, ownership, philanthropy, and other ESG-related topics.”

This has enabled the company to look beyond the next quarter. Its share price will recover as distributor inventories return to normal levels before the pandemic. 

The September 20 $60 call with a $0.30 ask price (0.50% down payment) has good risk/reward potential. For a longer expiration, the Dec. 20 $55 strike looks appealing. 

Polaris

Polaris (PII) hit its 21st 52-week low of the past year Tuesday, closing at $47.31, its lowest point since February 2019. PII stock has lost 22% over the past year and 5% over the past five years. However, it gained 277% from its trough in April 2020 to its five-year high in April 2021. 

Sales have declined for the maker of ATVs, SSVs, motorcycles, snowmobiles, and pontoon watercraft—the reason is that. The inflation and higher interest rates have dampened the consumer’s enthusiasm for big-ticket discretionary purchases. I’m sure commercial purchases are doing better. 

The company’s off-road vehicles account for over 40% of its revenue. Because farmers and many other businesses use them, the demand has remained relatively buoyant. The good news on the recreational front is that 70% of its revenue in the first quarter of 2024 was from new buyers. 

Get new and loyal customers, and the recurring revenue will move higher. 

In the meantime, the company expects 2024 revenue to fall 6% over last year at the midpoint of its guidance, with adjusted earnings per share down 12.5% from a year ago. That would be $1.53. That’s less than half the $3.46 a share it earned in 2022. It will get back there with lower interest rates.

The Dec. 20 $130 call with a $0.70 ask price is an interesting play. With a 0.50% down payment, you can double your money by selling the option before expiration with a $12.89 (16%) move over the next 212 days. It last traded above $130 in July 2023.   

 

 

 

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On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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