(C) Reuters. 2 Travel Stocks to Buy, 2 to Avoid
Travel stocks have outperformed over the past few months amid vaccinations and falling case counts. However, now that the easy money has been made, investors need to be more selective in choosing travel stocks. Read more to find out why CCL and DAL are likely to underperform, while SKYW and BYD will outperform.Over the past few months, travel stocks have been one of the strongest performing groups in the market. For example, the Invesco Dynamic Leisure and Entertainment ETF (PEJ) was up 87% from the start of November to mid-February of this year. The impetus for this move higher was the approval and distribution of the vaccine which portends an end to the coronavirus.
Case counts plummeted in the US, although they have plateaued around 50,000 to 70,000 since late February. Already, there are signs of a recovery for these parts of the economy based on upbeat commentary on earnings calls, expectations of pent-up demand, and improvement in data on a month-to-month basis. In recent days, the travel stocks have given back some gains as case counts have sharply risen in some countries.
Going forward, I believe that we will see more bifurcated price action within the sector. Think about how tech stocks have seen increased variance between different components following the Nasdaq’s big move in 2020. Similarly, watch for some travel stocks to keep trending higher, while others experience continued selling pressure. Carnival (NYSE:CUK) Cruises (CCL) and Delta Airlines (NYSE:DAL) have further downside risk, while Skywest Airlines (SKYW) and Boyd Gaming (NYSE:BYD) are two stocks likely to see more strength.
2 Travel Stocks to Buy, 2 to Avoid
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