Is it Time to Buy Travel Stocks?
Companies / Sector Analysis Mar 16, 2022 - 06:45 PM GMTBy: Stephen_McBride
Are you scared?
If so, you’re not alone. Many investors are freaking out right now.
The S&P 500 recently dropped to its lowest levels since September 2020. Many tech stocks have been cut in half over the past few months.
I regularly chat with dozens of investors. From conversations I’ve had in the past week, I sense folks haven’t been this worried since the onset of COVID-19.
But while much of the world panics, I see an opportunity to buy a specific group of stocks—a group that’s still hated after last year’s “fakeout”…
I’ll tell you all about it in a moment. First, let’s rewind the clock…
- Think back to the last time folks were this panicked…
Two years ago, COVID shut the world down.
The pandemic decimated many industries. Among the worst-hit were travel and tourism.
Prior to COVID, roughly 2.5 million travelers passed through TSA checkpoints on any given day. That plunged 95% to 90,000 in April 2020.
- Remember the “reopening trade” hype last summer?
Last summer, the world was supposed to reopen. With the arrival of vaccines, COVID was expected to go away quickly.
We all know how that played out.
The vaccine rollout in most countries took longer than expected. And new variants of COVID emerged—Delta and Omnicron—forcing people indoors once again.
Canada didn’t open its borders until last fall. America was closed to international travelers until November.
You needed a vaccine passport to fly overseas … yet most people didn’t get their shots immediately.
Even during the height of summer, tourist numbers only reached two-thirds of pre-COVID levels.
Now, things are finally starting to turn around…
According to the New York Times, more than 4.99 billion people have gotten at least one dose of a COVID vaccine. That’s 65.1% of the world’s population.
And all across America, mask mandates are being lifted for vaccinated people.
- The world is truly opening up this time.
Australia and New Zealand opened their borders last month.
Ireland, where I live, just scrapped mask mandates. Vaccine passports are a thing of the past in several European countries.
Flown in the past few weeks? If so, you likely noticed airports are packed. TSA data shows passenger numbers are now 90%+ of pre-COVID levels.
The number of Americans flying overseas jumped 130% compared to last year.
Europe’s largest airline, Ryanair, said it expects passenger numbers this summer to be 15% higher than 2019.
On its latest earnings call, online travel agent Expedia forecasted something bolder: “Summer 2022 will be the busiest travel season ever.”
Home-sharing pioneer Airbnb revealed the number of nights booked on its platform jumped 25% compared to 2019, ride-hailing giant Uber saw airport pickups triple year-over-year, and American Express achieved record earnings of the back of “stronger consumer travel spending.”
- I know a boom when I see one…
It’s not only one or two travel-related businesses putting up great numbers.
Airlines, travel agents, hotels, taxis, and credit card firms are all telling you the same thing: travel is back in a big way.
And this is just a taste of what’s to come. Tourism won’t just hit its pre-COVID 2019 peak…
It will surge to new highs. I’m 100% sure of this.
Think about what makes you truly happy.
I doubt it’s that new car smell or a crisp $5,000 suit. It’s experiences, like vacations with your family. Those are the things you remember for a lifetime.
Most folks have been deprived of this joy for two years. I know people who haven’t vacationed since 2019! They can’t wait to hop on a plane this summer.
Folks are sitting on thousands of dollars’ worth of travel vouchers, and they’re determined to make up for lost time.
Mark my words, we’ll see the strongest demand ever for vacations this year.
- Okay, Stephen… what does this mean for my money?
As I mentioned, many investors are panicking right now.
US stocks dropped 14% this year to their lowest levels since September 2020. And despite the coming tourist boom, travel-related companies have gotten rocked too.
Booking Holdings (BKNG) collapsed 30% in just 13 trading days. It’s now trading at the same levels it did when borders were shut, and nobody had a vaccine.
Ditto for the US Airline ETF (JETS). Airline stocks have plunged to levels last seen in the summer of 2020.
This is a great buying opportunity.
Travel-related stocks have been hit by fears over a slowing economy and rising inflation. The thinking goes… if folks are short on cash, they’ll cancel their vacations.
This is the big risk to investing in travel-related stocks, but it’s a risk worth taking.
Firstly, the market has already “priced in” these risks. Many travel-related stocks have plunged 20%–30% in the past two weeks. They didn’t even fall this hard when COVID hit!
The market has jumped ahead of itself. A recession, no matter how bad, won’t hurt travel as bad as COVID.
Also, many folks aren’t prepared to miss out on a vacation three years running. People will do anything they can to get away this year.
Some are sitting on thousands of dollars’ worth of travel vouchers, so vacations are essentially already paid for.
- I’ll leave you with a final tip…
Sometimes in markets, it pays to be brave and make big calls. This is one of those times.
We’re on the cusp of a travel boom. Nearly every travel business is showing us this. Yet, many of these stocks are trading like we’re still in the middle of the pandemic.
This is your opportunity to scoop up shares in quality travel-related companies for a big discount.
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By Stephen McBride
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