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Each week in Value Line’s Selection & Opinion service, we provide a list of the seven best and worst performing industries (from a stock price perspective) over the preceding six weeks. Periodically, we take a more in-depth look, generating three-, six-, and 12-month results for 98 industries. (Two industries, Investment Co. and Investment Co. (Foreign), are excluded from this presentation.) We recently presented this data in our February 1st issue of Selection & Opinion. 

The recovery of the domestic housing market was clearly the most profitable theme in the markets over the past year. Not surprisingly, this was especially evident in the Homebuilding Industry, where many stocks, including Hovnanian Enterprises (HOV), PulteGroup (PHM), and Ryland Group (RYL), more than doubled in price. Overall, the group advanced 84% during this stretch, easily taking top honors among the industries under our coverage. The rebound in home construction also did wonders for the stocks of many of the companies in the Building Materials and Retail Building Supply industries. These two groups held down the next two spots in our rankings, racking up gains of 68% and 53%, respectively.

Another industry that has enjoyed considerable investor support of late is the Recreation Industry. The group rose 34% over the past year, good for seventh place in our rankings. While not having direct exposure to the U.S. housing market, recreation stocks do appear to be getting a lift from a domestic economy that, despite the slight fourth-quarter setback in GDP, looks to be making solid progress along a number of fronts. In particular, consumer confidence is important for these companies, which offer products that shoppers may want, but don’t necessarily need. Consumer confidence reached a four-year high in November, which would appear to augur well for end-market demand at recreation-related companies. The December reading did slump noticeably, but we suspect this was largely a reflection of concerns regarding the “fiscal cliff,” which for the moment at least has receded as an immediate concern. 

This week we will take a closer look at two of the equities that have been at the forefront of the Recreation Industry’s prominence in the markets over the past year. Cinemark Holdings (CNK) exhibits motion pictures in the United States, Mexico, and Central and South America. It operates about 450 theaters with just over 5,000 screens. Shares of the Texas-based company have been a market favorite of late, climbing nearly 50% in the past year.

Strong operating results have likely helped to stoke investor enthusiasm, with the movie-theater operator appearing on track to post record sales and earnings in 2012, with the latter climbing nearly 40%, to $1.60 a share. December-quarter results have yet to be released, but an impressive release slate, combined with the success of the company’s XD screen format (a rival to IMAX), likely powered Cinemark to a strong profit surge in the final three months of the year. Moreover, we think the company’s ability to capitalize on the appeal of its XD screen format and expand its exposure to emerging markets in Latin America leave it well positioned to maintain its positive momentum into 2013 and in the years that follow. With this in mind, CNK shares still look to have room for healthy price appreciation in the 3 to 5 years ahead. This, combined with a generous dividend (yield: 3.2%), should produce worthwhile total returns for patient investors.

Winnebago Industries (WGO) is a leading manufacturer of recreational vehicles, particularly motor homes, which account for more than 80% of its revenues. WGO stock is quite susceptible to wide price swings, as suggested by its low score for Price Stability (15 out of 100). This volatility has worked to shareholders advantage in the past year, during which the stock price has more doubled to a multi-year high north of $18 a share. A surging top line has no doubt been a driving force behind this advance. In the November quarter, revenues rose 47% year over year, lifting share net to $0.26 a share, up from $0.04 in the prior-year period. The company’s prospects for the balance of its 2013 fiscal year (ends in late August) look bright, as well. Winnebago’s motor home backlog was up nearly 250% year over year at the end of November, while its towable backlog had swelled roughly 50%. Aside from setting the stage for healthy top-line gains, the strong demand for Winnebago’s offerings should also reduce the need for sales incentives, which augurs well for margins. In all, we look for full-year share net to reach $0.75, nearly triple fiscal 2012’s tally of $0.27.

These impressive gains should underpin support for WGO stock in the year ahead. The current valuation, though, looks to discount much of the profit growth we envision through 2015-2017. As a result, these shares are likely to appeal most as a near-term trading opportunity for risk-tolerant investors.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.