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12 Best Vacation Stocks to Buy Now

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·17 min read
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In this article we will take a look at the 12 best vacation stocks to buy now. You can skip our comprehensive analysis of these companies and go directly to the 5 Best Vacation Stocks to Buy Now.

Investors have been eagerly exploring rebound stocks in the hopes of cashing in early on the benefits that highly rewarding sectors of the economy might offer as they reopen. One particular business segment that has excited Wall Street is the vacation industry. Luxury firms that organize travel were hit hard by COVID-19 restrictions but seem to be on a comeback trail as the vaccine rollout enables people to gather together and go exploring once again. However, the exact speed of this recovery is still very uncertain four months into the new year.

This is not altogether surprising. Research by non-profit United States Travel Association shows that the tourism, travel, and vacation industry lost more than $500 billion in spending through 2020 compared to the previous year because of the coronavirus pandemic. The tourism sector was one of the worst-hit parts of the economy by the crisis and more than 3 million travel-related jobs were lost because of the pandemic. The industry is not expected to fully recover from this battering for another two years, the association claims in the report.

How are Vacation Firms Responding to COVID-19 Crisis?

Even as a travel boom bodes well for the short-term future of vacation companies, there has been a renewed focus on finding new and transformative ways to diversify the economic footprint of travel and tourism. For example, The Walt Disney Company (NYSE: DIS), which operates perhaps the famous theme parks in the world, has said it plans to open Disneyland and Disney Adventure by the end of this month. These parks have been closed for a year and brought in more than 30% of revenue for The Walt Disney Company (NYSE: DIS) in 2019.

Similarly, Booking Holdings Inc. (NASDAQ: BKNG), a website offering people the chance to reserve almost everything related to a perfect vacation from one platform, had a catastrophic 2020, with furloughs, layoffs, and a dramatic decrease in activity on its platform that pummeled advertising revenue. Booking Holdings Inc. has navigated the challenges well enough, and now plans to shift focus to aggressive marketing and eco-tourism to boost revenues heading into the new year.

Lindblad Expeditions Holdings, Inc. (NASDAQ: LIND), a travel firm that operates from New York, seems to have captured the spirit of the cultural capital of the world and is offering vacation-goers the opportunity to do something exciting this year through far-flung destination tours and adventure travel to get rid of the lockdown blues. Lindblad Expeditions Holdings, Inc. (NASDAQ: LIND) has recently posted encouraging quarterly results and said it plans to resume fleet operations to Alaska and the Galapagos this summer.

Airbnb, Inc. (NASDAQ: ABNB) is another notable stock being watched by investors interested in recovery stocks. Airbnb is set to announce its much-awaited Q1 results on May 13. Investment firm Susquehanna called Airbnb stock a top recovery pick after the company posted strong Q4 results. The firm said that Airbnb, Inc. (NASDAQ: ABNB) is a “must own” name to the upcoming recovery which it expects should start to “play out” this year.

As vacation firms try to get on top of the travel boom, it is important for investors to appreciate a basic business principle that will likely play a huge role for these firms. Global market consultancy McKinsey has highlighted in a study that more than 60% of customers will likely shape their opinion of a company based on how it has responded to crisis situations. Therefore, the vacation firms that maintained their brand name and managed to avoid negative publicity during COVID-19 should be good investments.

12 Best Vacation Stocks to Buy Now
12 Best Vacation Stocks to Buy Now

It is not only the pandemic that has caused changes to the way businesses operate. The introduction of new technology into almost every industry has also complicated matters. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

With this context in mind, here is our list of 12 best vacation stocks to buy now.

Best Vacation Stocks to Buy Now

12. Comcast Corporation (NASDAQ: CMCSA)

Number of Hedge Fund Holders: 84

Comcast Corporation (NASDAQ: CMCSA) is a Pennsylvania-based technology company with a diverse business portfolio that includes interests in theme parks, internet-related services, broadcast television, and telecommunication services. The company was founded in 1963 and is ranked twelfth on our list of 12 best vacation stocks to buy now. The firm owns and operates NBC, one of the biggest and most watched television channels in the United States. It has a market cap of over $250 billion.

Comcast Corporation stock soared more than 3% on April 29 as the firm announced quarterly earnings and reported that Peacock, a digital streaming service owned by the firm, had hit more than 42 million subscribers. Comcast now has more than 33 million customers globally after the gains reported in the first three months of 2021.

At the end of the fourth quarter of 2020, 84 hedge funds in the database of Insider Monkey held stakes worth $8.8 billion in the firm, up from 82 in the preceding quarter worth $8.1 billion.

11. The Walt Disney Company (NYSE: DIS)

Number of Hedge Fund Holders: 144

The Walt Disney Company (NYSE: DIS) is a Burbank-based media and entertainment company that also has significant stakes in the theme park and hotel industry. It has a market cap of more than $341 billion and posted $65 billion in annual revenue in 2020. Disney is placed eleventh on our list of 12 best vacation stocks to buy now. The firm owns and runs several television channels, including Disney, ESPN, Freeform, and National Geographic. The theme parks it runs welcome millions of visitors every year from around the world.

On April 23, investment advisory Rosenblatt said that the deal The Walt Disney Company had made with Sony Pictures for rights to Marvel films earlier in the month would be a positive for the Burbank company in the long run as it aims to compete with Netflix and Amazon in the digital streaming business.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Coatue Management is a leading shareholder in the firm with 11 million shares worth more than $2 billion.

Our calculations show that The Walt Disney Company (NYSE: DIS) ranks 11th in our list of the 30 Most Popular Stocks Among Hedge Funds.

10. Alphabet Inc. (NASDAQ: GOOG)

Number of Hedge Fund Holders: 179

Alphabet Inc. (NASDAQ: GOOG) is a Mountain View-based technology firm that owns and operates several internet-related businesses across the world. The company was founded in 1998 and is placed tenth on our list of 12 best vacation stocks to buy now. Alphabet is recognized for its ownership of search engine Google. It also owns mobile software Android and popular video sharing service YouTube. As people look to book vacations after the pandemic, Google is one of the top places to research travel plans around the world. The company is also benefitting from the recent rise in digital ads spending.

Alphabet Inc. stock jumped more than 4% during trading on April 27 as the company released quarterly earnings detailing that revenue had increased by 34% compared to the same period last year and operating incomes for the firm had doubled during the first three months of 2021. As more business opens after being shuttered for most of 2020, the advertising revenue of the firm, which is at the core of its earnings, is expected to rise further.

At the end of the fourth quarter of 2020, 179 hedge funds in the database of Insider Monkey held stakes worth $21 billion in the firm, up from 162 the preceding quarter worth $14 billion.

Our calculations show that Alphabet Inc. (NASDAQ: GOOG) ranks 6th in our list of the 30 Most Popular Stocks Among Hedge Funds.

1 Main Capital, in their Q1 2021 investor letter, mentioned Alphabet Inc. (NASDAQ: GOOG). Here is what 1 Main Capital has to say about Alphabet Inc. in their Q1 2021 investor letter:

"Alphabet Inc (GOOG), one of the largest and most talked about companies on earth, currently presents an incredibly attractive opportunity, especially relative to its risk. While some may be skeptical that an emerging fund such as ours could have any edge at all in owning GOOG, that is precisely our edge.

In other words, our ability to own GOOG without having to manufacture a variant view is one of the many competitive advantages we have compared to some larger, more institutionalized peers who may find it difficult to tell LPs that a vanilla company like GOOG is one of their favorite investments.

We are proudly running a relatively unconstrained strategy, and appreciative of our LP base that gives us the flexibility to look for the best risk / reward wherever it may lie. We also feel comfortable admitting that sometimes the most obvious bargains do hide in plain sight. In fact, despite nearly doubling since we first wrote it up in our Q2’18 letter, GOOG is just as exciting at current levels as it was back then.

Since pretty much everyone knows what GOOG does in its core business, there is no need to re-hash it here. However, I find it wild that we can own the most dominant advertising business on earth for less than 23x next year’s earnings (21x ex-cash). Typically, dominant, mature, global businesses that grow revenues in-line with GDP trade at higher multiples than this. Thus, given the relatively reasonable current multiple, I do not see much risk of long-term multiple compression here.

Yet, GOOG’s core advertising business, which drives all its profitability, actually grows much faster than global GDP. This is a business that has powerful secular tailwinds at its back, as advertising budgets continue to shift towards digital formats away from traditional ones. I expect this trend will continue for a long time and that current shareholders stand to benefit from the attractive growth.

Even better, GOOG’s earnings are not only growing faster than the average company, but they are also being weighed down significantly by its cloud business and various other bets. It is highly likely that these current drags on profitability will at some point generate significant earnings and be worth hundreds of billions of dollars.

Additionally, the company’s balance sheet is pristine. GOOG is sitting on over $100 billion of net cash. Many investors may argue that this is not a new dynamic. After all, the company has been building cash for a long time. However, the combination of GOOG’s new CEO (who effectively took the reins to start 2020) and well-regarded CFO (since 2015) are slowly instilling more focus and financial discipline on the company. Costs are being watched carefully, especially within other bets, and the pace of capital return has increased significantly of late. In fact, the pace of buybacks has more than tripled to greater than $30 billion in 2020, up from less than $10 billion in 2018. I expect this upward trend of buybacks to continue.

Looking out to 2025, it is not difficult to imagine a core Google Services segment that generates close to $100 billion of annual net income, after corporate costs. If we add to that cloud, other bets and interim cash generation we could be looking at a company worth $3 trillion by the end of 2024, which would make GOOG more than a double from current levels. Not bad for a boring, well known mega-cap.”

9. Uber Technologies, Inc. (NYSE: UBER)

Number of Hedge Fund Holders: 135

Uber Technologies, Inc. (NYSE: UBER) is a California-based technology firm that primarily runs a ride-hailing business but has in recent years diversified business to food delivery and autonomous vehicle production. The firm has a market cap of $107 billion and posted more than $11 billion in annual revenue last year. It was founded in 2009 and is ranked ninth on our list of 12 best vacation stocks to buy now. With travel resuming around the world slowly, Uber stands to gain a lot in 2021, compared to the lows of 2020, as the largest ride-hailing service in the world.

Uber Technologies, Inc. announced on April 28 that users could book Uber rides for vaccine appointments in the United States. The announcement came days after the company said it would be delivering COVID-19 testing kits to people at their homes in more than 24 cities in the North American country.

Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Altimeter Capital Management is a leading shareholder in the firm with 28 million shares worth more than $1.4 billion.

8. Southwest Airlines Co. (NYSE: LUV)

Number of Hedge Fund Holders: 55

Southwest Airlines Co. (NYSE: LUV) is a Texas-based airline and one of the largest aircraft carriers in the United States. The firm owns more than 700 aircraft that travel to more than 100 cities inside the US. The firm also offers international travel to Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, and Cuba. The firm was founded in 1967 and is placed eighth on our list of 12 best vacation stocks to buy now. The firm has an extensive digital presence and also provides a mobile application for travel assistance.

On April 22, Southwest Airlines Co. (NYSE: LUV) said that it had signed a deal to advance a partnership made with a firm making sustainable aviation fuel. The company said that it was estimated that more than 300 million gallons of sustainable fuel will be produced by 2025 and the company wanted to explore possible agreements for its purchase beforehand.

At the end of the fourth quarter of 2020, 55 hedge funds in the database of Insider Monkey held stakes worth $757 million in the firm, up from 51 in the preceding quarter worth $744 million.

7. Delta Air Lines, Inc. (NYSE: DAL)

Number of Hedge Fund Holders: 58

Delta Air Lines, Inc. (NYSE: DAL) is an Atlanta-based airline company that operates more than 1,000 aircraft and travels to hundreds of international destinations. It was founded in 1924 and is placed seventh on our list of 12 best vacation stocks to buy now. It recently announced that it was upgrading its fleet with the purchase of more than 20 Airbus 321 aircraft to add to the existing 100 such planes with Delta already. The tickets for Delta flights can be obtained from a variety of third-party vendors, travel agents, as well as the company’s own website.

Delta Air Lines, Inc. has a market cap of more than $29 billion and posted annual revenue of $17 billion in 2020, down from more than $40 billion in 2019. The coronavirus crisis has pummeled aircraft carriers as lockdown restrictions keep people from international travel, but things have been looking up as the virus vaccine allows for a return to normality.

Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in the firm with 5.3 million shares worth more than $215 million.

In the said letter, Miller Value Partners highlighted a few stocks and Delta Air Lines Inc. (NYSE:DAL) is one of them. Here is what Miller Value Partners’ said:

"Delta Air Lines Inc. (DAL) declined -1.38% over the period after the initial hit to the stock in 1Q following the outbreak of the COVID-19 pandemic. The company reported 1Q results with EPS of -$0.51, in-line with consensus. The company guided for June revenue to be down 90% YoY and announced another $1B cut to capital expenditures (CAPEX) for a total cut of $3B so far this year. The company ended the quarter with $6B in liquidity and they expect to end the June quarter with $10B in liquidity. Delta held its annual shareholders’ meeting where it noted that it expects to finish the 2nd quarter with over $15B in liquidity with a daily cash burn of $30M getting to breakeven by the end of the year.”

6. Booking Holdings Inc. (NASDAQ: BKNG)

Number of Hedge Fund Holders: 108

Booking Holdings Inc. (NASDAQ: BKNG) is a Norwalk-based firm that runs a website which gives users the option to book tickets, hotel rooms, restaurant reservations, and more. The firm offers all these services under brand names, including the option to rent cars, compare vacation packages and cruise options, and also get travel insurance. The firm is placed sixth on our list of 12 best vacation stocks to buy now and was founded in 1997. It was formerly known as Priceline Group.

Booking Holdings Inc. announced on April 21 that it had signed a partnership agreement with rival Viator that will bring the latter’s vacation offerings to Booking. The tours that Viator offers in North America and Europe will first be shifted to Booking before tours from other destination tours, the company said.

At the end of the fourth quarter of 2020, 108 hedge funds in the database of Insider Monkey held stakes worth $8.2 billion in the firm, down from 113 in the previous quarter worth $6.6 billion.

Our calculations show that Booking Holdings Inc. (NASDAQ: BKNG) ranks 19th in our list of the 30 Most Popular Stocks Among Hedge Funds.

RiverPark Large Growth Fund, in their Q1 2021 investor letter, mentioned Booking Holdings Inc. (NASDAQ: BKNG). Here is what RiverPark Large Growth Fund has to say about Booking Holdings Inc. in their Q1 2021 investor letter:

"We bought back a position in Booking Holdings during the quarter. Booking is the world’s leader in online travel, operating in 200 countries with brands including Booking.com, priceline.com, agoda.com, Kayak, Rentalcars.com and OpenTable. The company has been a dominant on-line travel agency for more than a decade with a high margin business model (40% EBITDA margin for 2019) that requires limited capital expenditures, typically less than 3% of revenue, producing $4.5 billion free cash flow for 2019. This cash flow has been used for episodic acquisitions as well as to return cash to shareholders.

BKNG is well positioned in travel as the largest player in online lodging bookings and the second largest player in alternative accommodations. Like all travel companies, Booking was hit hard by the pandemic, but with its high international exposure, we expect the company’s recovery to be equally strong when travel returns.”

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Disclosure: None. 12 Best Vacation Stocks to Buy Now is originally published on Insider Monkey.