There is a wide variety of companies that could be big beneficiaries of the reopening of the U.S. economy. In this Fool Live video clip, recorded on May 14, Fool.com contributors Matt Frankel, CFP, and Jason Hall, along with chief growth officer Anand Chokkavelu, discuss two of their favorite reopening plays that all three of them own in their personal stock portfolios.
Anand Chokkavelu: We’re talking about, there’s quite a big difference in terms of headwinds and tailwinds from the pandemic, which of these are the pandemic, I don’t want to say winners and losers, but which ones are going to, coming out of the pandemic, have the most to gain and which ones we really got to monitor the situation?
Jason Hall: I’ll go first here. I’m going to say the obvious one here is Disney (NYSE:DIS). You think about as much as it’s been able to build Disney+ basically from scratch into a 105 million subscriber business, it’s all of the other parts of its business that require people to show up in person that have suffered. I think the two things that are going to happen, No. 1, there’s going to be massive pent-up demand. I think if you think about Disney’s brand power and how that becomes pricing power, I think the company is going to able to charge basically what it wants for people to get into Disney+. I think people are going to really want to go back to the movies to see the blockbusters. I can’t remember what it was, but I think at one point, maybe in 2019 or a year before, Disney had seven or eight of the 10 biggest blockbusters that year. We’re talking billions and billions of dollars in box office revenues and a lot of that flows to Disney. I think those are the parts of the business that are going to recover and do really well. My No. 2, I think I’d say Seritage (NYSE:SRG). Because I think as reopening begins to happen, the merchants are going to want to make sure that they’re in front of those customers. Some of that freeze on signing new long-term contracts for leases, I think that might open up and that could really turn things around for Seritage in terms of accelerating its plans. Matt?
Matt Frankel: Seritage, I can argue is the biggest loser. Seritage wishes the pandemic never happened, don’t get me wrong.
Hall: Yes, completely.
Frankel: Seritage was a $40 stock before the pandemic. The reason is, before the pandemic, Seritage, I’ve mentioned they need to get to that $200 million of signed leases before they can get their credit line. They were getting close to that before the pandemic, then they ended up having to sell off a lot of those rent producing assets, which they didn’t really want to in order to keep their operations going. They went from about, I want to say about $170 million to about $130 million in in leases.
Hall: They went backwards.
Frankel: They went backwards. They’re definitely one of the biggest winners coming out of the pandemic, which is why the stock has roughly doubled since the vaccine rollout started. Seritage since the Pfizer vaccine data was announced, they’ve gone through the roof. But I would make the case that they’ve been the biggest loser of the pandemic. They’re still less than half of their share price before the pandemic. As far as the biggest winner, Disney is the obvious one and it’s just because they benefit on both sides. The parts of their business that really got crushed by the pandemic, the theme parks, the cruise lines, the movies, are going to be as strong as ever, if not stronger after the pandemic. They’ve already said that they’ve hit their reduced capacity every day in the past month, pretty much. They are going to be able to charge whatever they want to get into their theme parks, especially as they start really modernizing. I know Epcot, especially they’re building out a lot of new parts of that theme park. They’re going to be able to create as much demand as they can invest into their theme parks, and they have this whole new recurring revenue stream, that’s Disney+. Let’s be honest if the pandemic didn’t happen, what would Disney+’s paid members be? Maybe a third of what they are right now? I mean, I could tell you that we bought Disney+ specifically because we were stuck in our houses in the beginning of 2020. From just a personal example, we spent $30 to watch Mulan on Disney+ I could tell you. I’m not too proud to admit that.
Hall: There was a kind of a term that was born out of it of people saying that they got “Disney Plused.” Where they wanted to watch this movie and their kids saw and like, “Oh yeah, let’s do it.” Then it’s $30.
Frankel: We did it twice. We did it for Raya and the Last Dragon as well.
Frankel: I have little kids at home.
Hall: One of our colleagues got ran at that same thing. Needless to say, it’s either let your kid lose it or just pay the $30. Sometimes you just pay the $30.
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