Guilty pleasures are defined as activities, habits, food and more that cause people to feel shame or guilt when they indulge in them, usually due to the fear that they will be judged by others. This means the category could extend to fast food, desserts, extravagant coffees, streaming services, gambling and many types of games. Currently, due to wages rising faster than inflation, many Americans can devote more of their funds to non-essential activities, or guilty pleasures. For example, in March 2024, the average wage increased “0.6% more than inflation” versus March 2023. Similarly, in 2023 America’s wages rose 0.8% more than inflation. For investors who want to exploit the latter trend, here are three top-notch guilty pleasure stocks to buy.
Netflix (NFLX)
I’m sure we’ve all stayed up later than we should have, watching the wide variety of great shows that Netflix (NASDAQ:NFLX) offers — I know I have. These “binge watching” experiences often feels like guilty pleasures.
Thanks to its new advertising tier, Netflix is starting to benefit financially from its subscribers’ excessive streaming. Partly as a result of the latter phenomenon, the firm recently reported very strong first-quarter results. Specifically, its revenue jumped 15% in Q1 versus the same period a year earlier while its operating income soared 54% YOY and its operating margin increased by seven percentage points. Moreover, the firm’s net subscriber total climbed by a significant 9 million in Q1.
Given the firm’s impressive results, its enterprise value/EBITDA ratio of 10.9 times is quite low and attractive.
MGM Resorts (MGM)
Of course, gambling is a guilty pleasure because much of society looks down on the activity and views it as potentially detrimental.
However, the popularity of gambling is rising in the U.S. due to consumers’ rising disposable income, along with the legalization of online gambling and sports gambling by many states in recent years.
MGM Resorts (NYSE:MGM) owns a multitude of casinos in the U.S. and has a 50% stake in one of the most popular online casinos, BetMGM. As a result, the company is well-positioned to benefit from the proliferation of gambling in America and MGM is one of the best guilty pleasure stocks to buy.
In a recent note to investors, Japanese bank Mizuho initiated coverage of MGM with a “Buy” rating. Mizuho reported that its entire U.S. business only roughly 4.7 times its EBITDA, causing them to be significantly undervalued. Among the positive catalysts that are not being reflected in the stock are MGM’s alliance with Marriott (NYSE:MAR), BetMGM’s profitability and the casino in Japan which the firm is preparing to build, in partnership with another company, Mizuho contended.
Restaurant Brands International (QSR)
Restaurant Brands International (NYSE:QSR) owns Burger King and Canada’s famous cafe chain, Tim Hortons. Burgers and fries can feel like a guilty pleasure because they’re so unhealthy, while eating donuts is definitely very decadent.
Restaurant Brands continues to generate very strong financial results, largely due to Burger King’s strong performance outside of America. Recently, Tim Hortons has been sparkling as well.
In Q4 of last year, Burger King’s comparable sales jumped 6.3% YOY, while those of Tim Hortons soared 8.4%.
Successful investor Bill Ackman owns $1.7 billion of QSR stock, providing the company with a ringing, meaningful endorsement.
The shares have a low price-earnings ratio of 15.5 times and a significant forward dividend yield of 3.1%.
On the date of publication, Larry Ramer held a long position in MGM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.