Trading has come to a screeching halt for many entertainment stocks. Consumer services including small pubs, restaurants, bowling alleys, and cinemas, as well as hairdressers, beauty salons, and sports therapists are all under incredible pressure. If they can make it through to the other side, they stand to make a roaring comeback. So, among the depressed share prices, which are the best shares to buy now?
Investing in a risky sector
Lockdown 3.0 is an inconvenience for many of us and a nightmare for service businesses trying to survive long enough to enjoy a recovery. Companies like Marston’s (LSE:MARS) have been pulling out all the punches to survive. In a full-blown lockdown Marston’s spends £3m to £4m a week. It’s a huge figure required to keep things ticking over.
It explains why the Marton’s boss has so vocal in requesting a business rates holiday and VAT relief measures throughout 2021. Without extreme measures, businesses like this face a real risk of going under. While Marston’s share price was down 41% in 2020, year-to-date it has risen 15%.
Is Marston’s among the best shares to buy now?
Marston’s already let go of more than 2,000 staff and continues to have 97% of its remaining workers on furlough. It has also strengthened its balance sheet through a joint venture with Carlsberg. This has helped reduce a little of its debt burden. It now has around a year of liquidity room to weather a continued lockdown scenario. If pub-going resumes in the summer, Marston’s should bounce back with renewed strength.
Pent-up demand for fun and entertainment is there, as many of us relish an escape from the confines of our homes and same repetitive daily walk, run, or cycle. Demand for holidays is also likely to skyrocket so the hotels and airlines can look forward to a brighter future. This does all hinge on making it to that point and even once things do pick up, it’s going to take at least two years for many of these firms to return to pre-pandemic profitability.
Share prices rising
Revolution Bars, Restaurant Group, and Cineworld all saw their share prices decimated in 2020. And despite the third lockdown, each appears to be making a comeback in January. So, are these also among the best shares to buy now? Revolution and Cineworld were both in trouble before the pandemic took hold. With their risk factors now at an all-time high, I don’t think either of these looks like a sensible long-term buy.
Restaurant Group fares slightly better as it has adapted to offer takeaways. Wagamama, Chiquito, Frankie and Benny’s, and Garfunkel’s Restaurant all come under the Restaurant Group banner. In a recent note explaining the impact of the November lockdown, it confirmed it spent £5.5m that month. This shows there’s undoubtedly still risk in investing here, but the vaccine rollout points to a bright light at the end of the tunnel. If it means restrictions being lifted sooner rather than later, all the better for a return to service-based consumer spending.
I’d consider buying shares in Marston’s and Restaurant Group as I think consumers will make a rapid return to socialising once the restrictions are eased. I think investing in stocks in 2021 could prove lucrative and it’s a great time to start buying shares for a wealthier future.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Marstons. 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.