Leisure and travel industries are some of the biggest beneficiaries of rising consumer spending. As people feel they have more money to use on entertainment, vacations or getting out with the family, they put it to good use.
Investors can have a bit of fun also while they look for growing returns. Here are three companies that over the past year are benefiting from the rise in discretionary spending. It may be just the start.
Fun comes easily for Ardent Leisure Group (ASX: AAD), the operator of Dreamworld, Whitewater World, Goodlife Health Clubs and AMF bowling centres. Since 2010, consumer-spending trends in entertainment and leisure activities have pushed up revenue and earnings.
In the half year, underlying net profit rose 13.4% to $33.5 million on $250.6 million for a 13.3% net profit margin. Its U.S. business called Main Event – family entertainment centres with bowling, laser tag, indoor rock climbing and games arcades – saw the biggest percentage rise in earnings of all the divisions. That shows some improvement in U.S. consumer spending as well.
Its PE is 19.2 and the dividend yield is 4.7%.
Rival Village Roadshow Ltd (ASX: VRL) owns Warner Bros. Movie World, Wet'n'Wild Theme parks, as well as doing film distribution and cinema exhibition. It has been on a steady share price climb since mid-2012 from about $3 to $7.
As customers go to the theme parks and movies more, earnings have improved greatly since slumping in 2011 and are back in line with the earlier rising profit trend.
Following the economic growth of China and South East Asia in general, it is expanding its business in the region to take advantage of a rising middle class that craves more entertainment. Its first water theme park on the Chinese tourist destination spot of Hainan Island is under construction.
Sometimes it isn't just fun and entertainment that drives the travel business. For corporate travel management service provider Corporate Travel Management Ltd (ASX: CTD), business people need to travel more for their work.
It operates in Australia and the US and has recently acquired 75.1% of Hong Kong-based Westminster Travel to tap into the growing Asian corporate travel market. The company's full year FY2014 guidance is for $27-$28 million in EBITDA, up as much as 40% from the $20 million in FY2013.
Its share price is up about 36% in the last twelve months.
Foolish takeaway
Following the flow of consumer money is sometimes an easy investment strategy to find good quality companies all around us.
