5 Holiday Stock Ideas for Investors: Cook, Exercise and Sleep

With Thanksgiving in mind, we turn to an eclectic mix of investing ideas from MoneyShow.com contributors. Here's a look at kitchen and cookware retailers that might help with preparing your meal, fitness and diet stocks to help take off those extra pounds and a mattress maker for a good night's sleep after your Thanksgiving celebration. Chris Quigley, The Prudent Speculator Luxury home goods retailer Williams-Sonoma earned $1.02 per share in fiscal Q3 2020 (vs. $1.01 estimate). The company had revenue of $1.44 billion, versus the $1.42 billion estimate. The shares recently tumbled, even as the company raised the low end of its full-year guidance, which now stands at $4.65 to $4.80 for EPS (vs. $4.60 to $4.80 previously) and revenue between $5.77 billion and $5.90 billion (vs. $5.74 billion and $5.90 billion previously). CEO Laura Alber stated, While we continue to innovate the experience in our stores, our revenue growth was led by e-commerce at 9%, reaching almost 57% of revenues. Highlights from the brands include West Elm, which led our performance with a 14.1% comp on top of an 8.3% comp last year. Ms. Alber concluded, We are confident that we will deliver great service to our customers this holiday season and lead as an example of sustainability in our industry. We believe we are well equipped for an exceptional 2019 and we are ready for what's to come in 2020. Williams-Sonoma posted solid earnings and improved guidance, so it was a bit surprising to see the shares hit hard for what view as no transgression at all. The stock has gained 40% this year, handsomely outpacing the S&P 500 Retail Industry Group's more than 20% return. Management said that the company's mitigation strategies for the tariffs on Chinese goods have been paying off, and forward guidance includes no expectation that the tariffs will be repealed. Therefore, we think there would be additional upside if the tariffs were trimmed or eliminated. We think that WSM remains a compelling value proposition (with metrics like a 14 times forward P/E ratio, a 2.7% yield and a 0.9 times P/S ratio) with strong growth prospects. We continue to like the company's investments in technology, collaborations with other brands, in-store and in-home design consultations and sizable online presence. Our target price has been bumped up to $86. Douglas Gerlach, SmallCap Informer Middleby is a manufacturer of kitchen equipment for both commercial and residential markets. The firm is the largest global manufacturer of commercial cookware. Products are used in restaurants, from quick service to fine dining, and in institutional food service such as hospitals and schools. Consumers are more likely to be familiar with the company's residential kitchen equipment divisions, makers of Viking and TurboChef ranges and U-Line refrigeration units. This unit accounts for 21% of revenues. The most recent acquisition of beverage and ice cream dispenser maker Taylor bore fruit in the quarter. This was the latest of more than 30 acquisitions of the last five years. Another key recent initiative is adding internet of things technology to its kitchen products, a program that included the acquisition of Powerhouse Dynamics. Innovative equipment solutions will allow for deployment in smaller or vent-less locations, provide more speed and automation using less energy, and maintain food safety practices. We expect EPS and revenues to grow as much as 12% annually through 2022. With Middleby's EPS reaching $10.42 in five years, a high P/E of 23 would indicate a high price of $239. On the downside, a low P/E of 14 (not seen since 2011) suggests a potential low price of $83. The upside/downside ratio is 3.3:1, and a potential annual return of 15% is possible. John Reese, Validea We analyze stocks based on the strategies of some of the stock market's most legendary long-term investors. Medifast is a buy in our model portfolio based on the Price to Earnings Growth strategy of famed Fidelity fund manager Peter Lynch. Medifast produces, distributes and sells weight loss, weight management, and healthy living products, and other consumable health and nutritional products. Optavia is a personal coaching division of the company that consists of Optavia Coaches, who provide coaching and support to clients utilizing the Optavia platform. Medifast Direct is its direct-to-consumer business unit that allows customers to order Medifast products directly through its Website or its in-house call center. The Medifast Weight Control Centers business unit sells product through franchise and reseller locations, which offers structured programs and a team of professionals to help customers achieve weight-loss and weight-management success at center locations. Under Peter Lynch's price-to-earnings growth investment strategy, the investor should examine the P/E (12.62) relative to the growth rate (29.80%), based on the average of the 3, 4 and 5 year historical EPS growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the price-to-earnings growth ratio for Medifast of just 0.42 is very favorable. This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate is 29.8%, based on the average of the 3, 4 and 5 year historical EPS growth rates, which is acceptable. Meanwhile, the debt-to-equity ratio -- currently zero -- is wonderfully low. This ratio is one quick way to determine the financial strength of the company. Mike Cintolo, Cabot Top Ten Trader Peloton is popular because it's pioneering a new industry of sorts. The company bills itself as the largest fitness platform in the world, allowing members to access (via a big screen attached to their equipment) live or recorded instructor-led classes. It's literally like being in a quality fitness class (nearly 1,000 original programs per month from 81 showrooms) from your own home! The concept has caught on fast. Indeed, my wife has been using the bike for three years; 650-plus rides so far! The key here is the business model -- not only does Peloton make money from the sale of the bike and treadmill (which can run two grand or so, though there's a 30-day free test period, installation included), but it also makes recurring revenue (~$40 per month) from a monthly subscription to access the live and recorded workout sessions. At the end of September, paying members totaled 562,777, up 103% from a year ago (1.6 total member accounts -- more than one person can use each bike), few people are leaving once they sign up (94% 12-month retention rate) as members are working out more (11.7 times per month, up from 8.9 a year ago), all of which has produced triple-digit revenue growth. Earnings are deep in the red as the firm expands (vast majority of users are in the U.S., but it's selling in the U.K. and Canada as well), but the potential is there, especially if Peloton moves down the price chain and attracts more mass market consumers. It's a high-potential story. Richard Moroney, Upside Stocks Sleep Number offers smart beds that track a sleeper's movement, breathing rate, and habits, collecting and monitoring thousands of data points every night. The mattresses generate a daily score based on the quality and quantity of sleep. Robust demand, product launches, and steady store expansion are driving profit growth. The company expects to operate nearly 610 stores across 50 states by year-end, a 5% increase from a year earlier. Shares rallied on strong September-quarter results and encouraging guidance. Per-share earnings jumped 81% and topped expectations by 19%, as sales rose 14% to a record $475 million. Consensus estimates project per share profits will jump 36% to $2.61 for full-year 2019, even though December-quarter earnings are expected to fall 9% to $0.74. For 2020, the consensus calls for per-share earnings of $2.95, up 13%. Revenue should climb 7%. The shares trade 28% below their five-year average P/E. Should the stock return to its historical norm, the shares would trade at $74 using the 2020 earnings estimate, implying upside potential of more than 50%. Sleep Number, with a year-ahead estimated P/E nearly 15% below its 10-year norm, is being initiated as a Buy.

5 Holiday Stock Ideas for Investors: Cook, Exercise and Sleep

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