Tag: Stocks 

The Air Travel Recovery Has Stalled. Why It Might Be Time to Buy Airline Stocks Anyway.

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Delta Air Lines said it expects to be cash-flow positive next spring.


Daniel Slim/AFP via Getty Images

Bearish sentiment on airlines may be running deep. But some analysts are making a case for the stocks, arguing there’s value in a lagging sector that has a postpandemic recovery path.

Citigroup analyst Stephen Trent reiterated Buy recommendations on several domestic and foreign airlines Wednesday, including

Delta Air Lines

(ticker: DAL),

Spirit Airlines

(SAVE),

Ryanair Holdings

(RYAAY),

Azul

(AZUL), and

Copa Holdings

(COPA).

The rationale for airline stocks is getting tougher as it sinks in that the recovery will take longer than hoped. “We are looking at a tough winter with cash crunches,” Trent writes. And it’s hard to be positive on a cyclical sector that isn’t participating in the broader cyclical rally that has lifted transportation and industrial stocks.

“But at a certain point,” he writes, “there’s scarcity value in a lagging sector with post-pandemic legs…the challenge being when and where things normalize.”

Global traffic patterns point to a mixed and uneven recovery. Air travel in the U.S. has improved a bit lately, with more than 1 million passengers going through security checkpoints on Sunday, the highest levels since the early days of the pandemic in mid-March. But that is still well below daily averages above 2 million passengers last fall, and traffic—which fell back to 662,000 passengers on Tuesday—isn’t showing a sustained rebound.

Total traffic isn’t the only headwind—it’s the fares and revenue composition, too. The U.S. recovery is being fueled by leisure and small-business travel, while large-scale corporate and international travel remains severely depressed. Consumers taking short hops to see friends and family may be filling planes domestically, but it isn’t helping the full-service legacy carriers that built route structures based on higher-margin business and international travel.

Global air travel remains broadly depressed. Domestic traffic in China is now higher, year over year, and Latin American markets like Brazil are looking stronger. But travel to European destinations is stagnating. Ryanair, Europe’s largest airline, recently said it would maintain capacity at 40% of last year’s levels through the first quarter of 2021, well below prior estimates of 60% of capacity. Travel restrictions by the European Union “forced” the airline to trim its schedule, Ryanair CEO Michael O’Leary said.

Country-specific travel restrictions remain a big hurdle. Canada, for instance, recently loosened some restrictions, allowing extended family members to visit for the first time since the pandemic started. But the rules remain onerous: Visitors must commit to staying in Canada for 15 days, present a detailed quarantine plan, stay isolated for 14 days, and have written authorization for the visit from Canadian immigration authorities. “Until further notice, most foreign nationals cannot travel to Canada, even if they have a valid visitor visa,” the Canadian government said.

Airlines are cutting their cost structures by 30% to 40% to adjust to lower demand, Trent writes. But the big question remains: When will a sustainable recovery take hold?

J.P. Morgan analyst Jamie Baker is

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7 Hotel Stocks to Buy for the Fearless Traveling Investor

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Before I begin discussing my thoughts regarding the possible bullish case for hotel stocks, I must start with a confession: this is one of the most difficult topics in the investment sector right now. Although Americans are optimists at heart, the novel coronavirus pandemic has brought much of our unfiltered thoughts into the open. Much of that has translated into positivity, as neighbors step up to help those in need.

But in other situations — as you well know — the pandemic has fueled long simmering tensions that have exploded onto center stage. Of course, I’m referring to the protests calling for racial justice, which has sparked a countermovement among the right wing. Caught in the middle are folks who are tired of the sudden political division. Within this mix, you have those who are fed up with social distancing and mitigation measures, likely causing a rise in new coronavirus cases in the U.S.

None of this is helpful if you’re banking on hotel stocks to lift your portfolio. For me, one of the factors that bothers me is that so many names in this sector are charting bearish rising wedge patterns. A possible example of this is Hilton Hotels (NYSE:HLT). Ordinarily, I’d love to include this company into a list of hotel investments to buy. But the warning signs are enough to give me pause.

That said, there is supportive narrative for hotel stocks. First, we’re heading into the holiday season and this could possibly lead to greater travel demand. Not only is there pent-up demand from people tired of sitting at home, we are social creatures. We cannot be separated from our family and friends for too long. If anything, this crisis has demonstrated the importance of our relationships.

Second, some countries or regions just have better disciplined people than here in the U.S. For the next few months, I suspect we’ll hear about the term “social trust” more often. Those nations that have greater trust will likely see their economies bounce back from Covid-19. Therefore, I’m going to think outside the box for potential hotel stocks to buy.

  • Choice Hotels (NYSE:CHH)
  • Wynn Resorts (NASDAQ:WYNN)
  • Hilton Grand Vacations (NYSE:HGV)
  • Daiwa House (OTCMKTS:DWAHY)
  • Japan Hotel REIT Investment Corp (OTCMKTS:NIPOF)
  • Huazhu Group (NASDAQ:HTHT)
  • Red Lion Hotels (NYSE:RLH)

And just a reminder: The travel industry isn’t completely dead. I would know because I’ve visited a few hotels during this awful period. From my experience, the hotel industry is taking safety measures very seriously. Thus, I suspect that many other travelers will feel reassured, thereby leading to word-of-mouth favorability sentiment. Keep that in mind as you go through these hotel stocks to buy.

Hotel Stocks: Choice Hotels (CHH)

A magnifying glass zooms in on the Choice Hotels (CHH) website.

Source: II.studio / Shutterstock.com

I’m going to start off this list of hotel stocks with both a company and a warning. Fundamentally, I like the case surrounding Choice

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