Book Profits With These Three Travel Stocks
Shah Gilani|May 31, 2024
As the sun rises earlier each morning, ushering in the warmth of summer… the allure of travel and leisure beckons like a siren song.
But the seasonal shift isn’t just about packing away cold-weather clothes and dusting off sunglasses…
It’s a signal for investors to take a look at travel and leisure stocks.
There are several reasons why…
The height of travel and leisure activity is during summer.
Folks head out on adventures, families plan vacations, and the tourism industry kicks into high gear.
Airlines, hotels, cruise lines and booking companies all see higher demand. That turns into increased revenues and potential profitability.
After the challenges and restrictions of the global pandemic, there’s still a deep reservoir of pent-up demand for travel and leisure.
Consumers are more eager than ever to indulge in long-delayed vacations and recreational pursuits. (The TSA reported 2.9 million travelers on the Friday before this Memorial Day, a single-day record!)
This surge in demand has been fueling the resurgence of the industry.
The summer months also happen to coincide with broader economic recovery trends. Increased discretionary spending bolsters the prospects of industries reliant on consumer confidence and disposable income.
Travel and leisure companies benefit significantly from this seasonality, as that’s where consumers are spending their money.
The pandemic also forced travel and leisure companies to innovate and adapt to changing circumstances, all for the better. Companies embraced the digital economy, implementing contactless solutions and enhancing online booking platforms to cater to changing consumer preferences.
These tech advancements not only improve efficiency… but also enhance overall customer experiences, positioning companies for sustained growth in the post-pandemic landscape.
Finally, travel and leisure stocks offer diversification in an investment portfolio. The sector, especially in summer, can operate independently of traditional market cycles.
So here are three travel stocks worth a look…
Book Your Profits
When we talk about travel booking companies… Expedia Group (EXPE), Trip.com (TCOM) and Sabre Corp.(SABR) come to mind.
But only one stands out as being the best in terms of its stock performance…
Booking Holdings (BKNG).
The stock is pricey at $3,700 per share. But that’s not a hurdle since we can buy fractional shares.
It’s expensive because the stock’s been a steady riser, unlike most of its industry competitors. Booking boasts $22 billion in revenues and a 22% profit margin.
The company’s year-over-year quarterly revenue growth is a strong 16.90%. But far more impressive is its quarterly earnings growth… at an amazing 191.70% year over year.
When it comes to airlines – while they all see an uptick in passenger miles flown in summer – they don’t all have good balance sheets, or the best hubs, or updated and newer aircraft. And they all have a ton of debt and staffing problems, including a pilot shortage.
So despite summer’s revenue uptick, there isn’t an airline stock worth my capital or yours. But there is way to play the field – or friendly skies, if you prefer – that comes courtesy of an ETF.
The U.S. Global Jets ETF (JETS) includes most airline stocks. That makes it a diversified way to play a potential rise in summer revenue for airlines… without trying to pick a clean stock out of a laundry bag full or dirty stocks.
If the skies clear for some airline stocks – especially Delta (DAL), United (UAL), American (AAL) and Southwest (LUV) – you’ll get a ticket to ride higher. These stocks account for more than 43% of the ETF.
Above all… I like the cruise lines this summer. They combine both travel and leisure… and that’s a beautiful way to play the sector.
My favorite in the space is Royal Caribbean Cruises (RCL).
Royal Caribbean boasts the best stock appreciation. It’s had a great run higher this year, especially when compared to the volatile rides Carnival (CCL) and Norwegian (NCLH) have endured.
Royal Caribbean’s $14.75 billion in revenue (over the past 12 months) and its tidy 14.5% profit margin help, for sure. So does its quarterly revenue over the trailing 12 months, showing almost 30% growth.
That’s impressive… and why the stock will likely continue to be a winner.
As summer unfurls its tapestry of warmth and adventure, investors should not overlook some of the opportunities in the travel and leisure sector.
With pent-up demand, economic recovery, technological innovation, and long-term growth prospects converging, now marks an auspicious moment to consider investing in the right travel and leisure stocks.
Cheers,
Shah Gilani
Shah Gilani is the Chief Investment Strategist of Manward Press. Shah is a sought-after market commentator… a former hedge fund manager… and a veteran of the Chicago Board of Options Exchange. He ran the futures and options division at the largest retail bank in Britain… and called the implosion of U.S. financial markets (AND the mega bull run that followed). Now at the helm of Manward, Shah is focused tightly on one goal: To do his part to make subscribers wealthier, happier and more free.
