Travel stocks sell off, but there could be buying…
Travel stocks are in turmoil, again.
Airlines, hotel and cruise stocks sold off Monday as a new Covid strain broke out in the U.K. and Europe tightened travel restrictions.
It does not make sense to jump into these names yet, even with the pullback, Joule Financial President Quint Tatro told CNBC’s “Trading Nation” on Monday.
“I would be very, very patient. This is a case of the ‘second mouse gets the cheese’ in my opinion. There’s no rush,” Tatro said. “I’m just not sure that an investor needs to take a shot at something that is so headline-risk driven. All of a sudden you wake up, and the next thing you know your stock is down 4% or 5%.”
Travel stocks have been subject to the whims of the lockdown and reopening trade this year. The JETS airline ETF, for example, has bounced nearly 100% off its March lows but remains 32% below its January peak.
“We like the hybrid approach,” said Tatro, naming Uber and Lyft as two of his favorite plays. “These are names that are going to participate if in fact we continue to see travel emerge and people getting out and doing things.”
Those two should also work even in the case of lockdowns, he added. Uber, for example, has grown its Uber Eats business during the stay-at-home environment.
“That kills two birds with one stone and those are the areas that we would prefer if we were looking at this space and those are names we are buying here actively,” said Tatro.
Nancy Tengler, chief investment officer at Laffer Tengler Investments, told “Trading Nation” she favors one pure play in the travel industry.
“Southwest gets 97% of the revenues domestically. They’ve been buying up routes all year, so not just in the U.S., some in Mexico, but largely resort-kind of oriented routes, and then they’ve been the most efficient at cost cutting of all the U.S. airlines,” Tengler said Monday.
Southwest Airlines has underperformed the market this year but traded better than the rest of the airlines. The stock is down 15% in 2020, a narrower loss than the 30% drop for the JETS ETF.
“Add in the fact that though rising energy prices are impacting those of us who are driving, jet fuel prices actually declined due to lack of demand,” she said. “So I think for the near term, maybe the next six to nine months, this stock is exceptionally well positioned if you want to be an investor in the airlines and we actually own it.”
Disclosure: Tatro and Joule hold LYFT and UBER. Tengler and Laffer Tengler Investments hold LUV.
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