|Written by GSCR Staff
|Wednesday, 31 December 2014 06:47
If you read the latest edition of The Goldman Guide you no doubt pondered some of our thoughts on falling oil and gas prices.
We never thought we would see gas under $2 again, but it is here in a lot of places around the country. Again, proceed with some caution here, because as we stated, cheap gas is not necessarily great news for everyone. With that said, some consumer discretionary or similar companies and stocks could really benefit from prolonged relief from pain at the pump.
Our “slumber” stock is an appropriate winter seasonal play and the associated increase in the hours spent indoors. La-Z-Boy Incorporated (NYSE – LZB - $26.73) is a household name in furniture products, accessories, and case goods furniture products in the United States and Canada. Our theory here is that the consumer will no doubt look to finally get some new furniture this winter and companies like La-Z-Boy could serve as a direct beneficiary.
LZB looks great from a basic valuation perspective with a forward P/E of 16 versus a trailing P/E of 23 with a 5-year PEG of 1.15. The stock is currently trading above the 50, 100, and 200 day EMA. Outstanding gross margin of 35% and 7% operating margin versus current industry averages of “0” for both metrics show that the Company is maximizing price points and efficiency as well. Big numbers for the next few quarterly financial reports could drive accumulation in 2015. We think a price level of $30 by the end of spring is within reach.
Our “slopes” pick is a resort play for this winter. Peak Resorts, Inc. (NASDAQ – SKIS - $8.21) is an up and comer small cap play. The Company’s ski resorts include snow skiing, snowboarding, snow sports areas, golf course, hotel, and restaurant facilities. It operates 12 ski areas through the Midwest, Northeast, and Southeast United States.
Granted, the Company just went public last month and the stock has already seen the typical high in the first few days of trading with prices above $9, followed by a bottoming out under $7 a few weeks later. It appears a steadier accumulation phase has started over the past week or so.
We usually do not like feature stocks that have such short trading histories and SKIS is definitely more of a speculative play our typical Market Monitor picks. However, we think the consumer will take those vacations they have skipped over the last few years and companies like Peak Resorts could see a resultant spike in revenue. SKIS should get some pops as well if the Company beats expectations when it reports on 1Q15 financial results. We think a $10 target is possible by the end of 2Q15.
Have a great day and a Happy New Year!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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