We are almost in the final quarter of 2021, and I think it is a good time to start planning my investments for the next year. In terms of growth stocks, most promise appears to be in those segments that are still feeling the impact of the pandemic. These include cruises, airlines, and other travel-related stocks, most obviously. But perhaps less evidently, they also include pub stocks, which have seen some recovery but are still trading below pre-pandemic levels.
Mitchell & Butlers sees improved performance
Consider Mitchell & Butlers (LSE: MAB), which released a trading update earlier today. The group, which owns pub and restaurant brands like All Bar One, Browns, and O’Neills, has reported encouraging numbers for the post-lockdown period. Since bars and restaurants are allowed to reopen indoors in mid-May, its like-for-like (LFL) sales have risen to 97% of their pre-pandemic levels. And in the past eight weeks, which covers the two months since ‘freedom day’, the number is even better at 104%.
This is an encouraging sign for a stock that was profitable before Covid-19. And going by the fact that the FTSE 250 stock is an established brand, I expect that it can rise more as the pandemic recedes. Much progress has already been made, and while some uncertainty remains, it is one I am seriously considering. This is especially since its share price is still around 40% lower than the early 2020 highs.
Fuller Smith & Turner is also recovering
Similarly, Fuller Smith & Turner also reported somewhat encouraging trends in the post-lockdown period earlier today. For the seven weeks to 18 September, its LFL sales are at 86% of their 2019 levels. It also says that country pubs have benefited from domestic travel in the summer months. And its London pubs are also showing a pickup in activity. Also, much like Mitchell & Butlers, its share price is also below its early 2020 levels, indicating that there is scope for improvement as uncertainty subsides further.
Marston’s could pick up too
Other pub stocks are worth considering too. One of them is Marston’s, which is still a penny stock after it fell fast in early 2020. It has not recovered since, and is still trading at half the highs of that time. In late July, shortly after all restrictions were lifted, the pub reported better than expected performance on account of warm weather and the Euro 2020 tournament. In this case though, the one drawback is that the company’s performance was slipping even before the pandemic happened. Also, there were talks of its acquisition earlier in the year. So, I maintain that I would wait for more updates to see where it is at.
Recovery stocks I’d buy
Overall, I think pubs as a segment can rise significantly from current levels if the virus remains under control. With more consumer spending likely as people step outside the house, it can pick up fast. But I would wait for detailed financial results from these companies before deciding my pick from among them.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.