Many analysts predict travel and leisure stocks will shine this year because pent-up demand is enormous and everyone will be booking vacations and trips once the vaccine rollouts are complete. But not every travel company will prosper even if the economy rebounds strongly. Example: Some cruise lines are saddled with enormous debt that they took on just to survive…and some restaurants saw their stocks soar in the pandemic and now trade at inflated valuations.
Portfolio manager William Hilkert says to focus on undervalued companies that don’t need booming GDP growth to do well. Just a reopening of the economy—and revenues and profits returning to normal—will boost stocks in the following areas…
Casino resorts: The drop in tourism has devastated Las Vegas, but it is poised to rebound sharply. His fund owns: Caesars Entertainment (CZR) with 53 domestic gaming properties, including Bally’s, Caesars Palace and Harrah’s in Las Vegas. Recent share price: $92.98.
Fast-casual restaurants: As consumers gradually resume their pre-pandemic routines, many may feel more comfortable returning to affordable, sit-down cafés and restaurants. His fund owns: Starbucks Corporation (SBUX), which operates more than 30,000 company-owned locations. Recent share price: $107.20.
Hotels and online travel marketplaces: The industry in the US is dominated by a handful of large brands. Operating trends should steadily improve as consumers start planning trips for later in 2021 and 2022 and as corporate travel resumes. His fund owns: Marriott International (MAR) and Hilton Worldwide Holdings (HLT), well-known and established hotel chains. Recent share price: $148.95, Marriott…$124.25, Hilton.