Is Your Portfolio Poised To Profit From the Summer Travel Boom?

Thursday, May 06, 2021

No matter which day of the week it is, I can’t pursue the financial news without seeing speculation on when we’ll see money flowing back into the travel industries. Airlines, cruise lines, hotels, amusement parks and tourist towns haven’t seen true recovery.

Yet.

The trend seems to be heading in the right direction. Just last month, I stayed at a Hilton Garden Inn up in Baltimore. There was no housekeeping, but anything that we needed could be asked for at the front desk any time of day. They had no problem giving us fresh towels or more K-cups for the coffee maker. The continental breakfast items were listed on the front desk each morning, and then the desk associate would grab your prepackaged choices and hand them to you in a brown paper bag.

We had an enjoyable stay, and it seemed like they had figured out how to make everything work. When I went to add on an additional night to our stay, I found that I had to pay $40 more than our rate for the rest of the week due to the popularity of the date. But our individual experiences are always just a little taste of the whole picture.

Pent-up travel demand continues to grow. People across the globe have the desire to celebrate graduations, weddings and other special events that continue to get postponed. This piling up demand will have to give … but we’re still waiting.

Yesterday, Hilton Worldwide Holdings Inc. (NYSE: HLT) released first-quarter earnings … and they were worse than expected. Adjusted earnings came in at just 2 cents per share, missing analysts’ expectations by 8 cents. Although the company is seeing occupancy rates recover, average daily rates are down 24% compared to the year before.

But it’s important to keep in mind that the real question of recovery for the travel industry isn’t if ... it’s when.

I’ve been keeping a close eye on airline trends. While the number of passengers is still only at 60% of the volume from 2019, it’s expected to improve as more people are vaccinated.

More importantly, airlines have finally hit an important volume target. It’s not just that planes are flying at fuller capacities — airlines now have to add flights to service the demand. United Airlines Holdings, Inc. (Nasdaq: UAL), for example, recently announced that it would be adding hundreds of flights. June will see it fly its largest schedule since the pandemic hit.

So, is it time to grab shares of your favorite airlines? Let’s check:

•  American Airlines Group Inc. (Nasdaq: AAL) currently has a “D” rating, and shares are down 11.6% in the past month.

•  Southwest Airlines Co. (NYSE: LUV) currently has a “D+” rating, and shares are down 3.5% in the past month.

•  Delta Air Lines, Inc. (NYSE: DAL) currently has a “D” rating, and shares are down 11% in the past month.

•  United Airlines has a “D” rating, and shares are down 10.9% in the past month.

•  JetBlue Airways Corp. (Nasdaq: JBLU) has a “D” rating, and shares are down 10% in the past month.

•  Spirit Airlines Inc. (NYSE: SAVE) has a “D” rating, and shares are down 8% in the past month.

All the names above are still sitting at “sell” ratings. And no airline company currently has a “buy” rating. So, it might not be the best time to grab an airline to add to your portfolio.

All the transportation companies currently listed as “buy” are in land or sea shipping logistics.

Mesa Air Group, Inc. (Nasdaq: MESA) is one of two airline companies that have a “hold” rating. Mesa Airlines operates a large fleet of regional jets and narrow-body aircrafts. They operate the planes on behalf of their partners. These partners sell the tickets and load the cargo, but Mesa provides the aircraft, crew and maintenance. These partners include American Airlines, United Airlines and DHL.

Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) is the second company with a “hold” rating. But as a leader in global air freight, it’s not a company that will benefit from the growth in travel. 

The logic there is that the trend to recovery is inevitable. And there’s no doubt there will be an opportunity for investors to profit. But timing is everything. We’re not seeing proof of the recovery trend in air travel just yet.

Instead of investing in these airlines and simply waiting, I recommend adding these companies to your Weiss Ratings watchlist. This way, you’ll get an email alert when the ratings change. It will look similar to this one:  

As you start to see these climb the ranks, you’ll know that it’s time to get in. And if they don’t, well, you didn’t put your money in just to see it sit stagnant for months.

Work smarter and not harder, and use the tools at your disposal to make the Weiss Ratings work for you. All you have to do is click the star bookmark button located in the upper right, just below the company’s current rating, to save it to your watchlist. Then, we’ll let you know when those ratings change.

Best,

Kelly Green

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