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8 Top Travel Stocks to Pack in Your Portfolio if Omicron Throws a Weak Punch

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·9 min read
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Two years after the first Covid-19 cases emerged in Wuhan, China, and the coronavirus pandemic is rolling along stronger than ever. What this means for travel stocks, however, remains fuzzy.

Yes, the omicron variant appears to be more transmissible than the original virus or its delta variant. And we all remember how the world shuddered to a stop in March 2020 as Covid-19 started sweeping the globe.

Travel stocks were one of the hardest-hit sectors.

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But not all is lost. As an investor, you have to be prepared for the idea that omicron won’t have the same debilitating impact as the original virus.

First, there are vaccines readily available in the U.S. and in many parts of the world. More than 4.4 billion people already received at least one vaccine dose, and more than 3.6 billion are fully vaccinated. That’s roughly 46.5% of the global population.

On top of that, there are indications that the omicron variant may not be as deadly as other versions of the coronavirus. So, the human race is more protected than it was when Covid-19 first emerged two years ago.

Travel stocks include airlines, hotels, booking companies and more. Many had a bumpy ride over the last two years, but there are opportunities for profit if you know where to look.

Here are eight interesting travel stocks to buy should omicron fears fade away in sooner rather than later:

  • Royal Caribbean Cruises (NYSE:RCL)

  • Southwest Airlines (NYSE:LUV)

  • Airbnb (NASDAQ:ABNB)

  • Expedia Group (NASDAQ:EXPE)

  • American Express (NYSE:AXP)

  • Walt Disney Company (NYSE:DIS)

  • Hyatt Hotels (NYSE:H)

  • Amadeus IT Group (OTCMKTS:AMADY)

Travel Stocks to Buy: Royal Caribbean Cruises (RCL)

Royal Caribbean (RCL) ship Allure of the Seas, docked.
Royal Caribbean (RCL) ship Allure of the Seas, docked.

Source: Laszlo Halasi / Shutterstock.com

When Covid-19 became a huge issue in early 2020, one of the first things I did was buy Royal Caribbean stock. It was a huge winner for me – I sold it roughly 17 months later for a profit of more than 200%.

Why was I bullish on RCL stock even during a pandemic that shuttered the cruise line industry? Because I love finding beaten-down stocks that have a tried-and-proven track record of success. And the allure of vacationing on a cruise ship is overwhelming for many people.

The Cruise Lines International Association says the number of passengers on global cruises jumped from 17.8 million in 2009 to about 30 million in 2019, the last year before Covid-19. And it’s just a matter of time before those numbers return to normal.

As I already pointed out, RCL stock rebounded in a big way in 2021. But even at its peak, Royal Caribbean was still about 45% off its all-time highs set in January 2020.

The omicron variant help push Royal Caribbean down by 25% since early November. RCL stock will make up that ground quickly if omicron turns out to be overblown.

Southwest Airlines (LUV)

a southwest airline stocks (LUV) jet flying above the clouds
a southwest airline stocks (LUV) jet flying above the clouds

Source: Carlos E. Santa Maria / Shutterstock.com

If you’re a northerner, you want to spend your winter vacation somewhere warm. And if you’re a southerner, you probably want to go somewhere to escape all the snowbirds, right?

Either way, you will likely be flying somewhere. And for my money, Southwest Airlines is a top pick in the airline set right now.

All the airlines took a beating during the pandemic, but Southwest was the first major airline to post a quarterly profit after the travel industry shut down. It also has a superior balance sheet to its industry rivals.

Earlier this month, Southwest revised its fourth quarter outlook by saying its revenue would be no worse than 15% below pre-pandemic levels. Not only did it project posting a profit this quarter, Southwest said it would earn as much as $1.5 billion in 2023. And it would resume paying a dividend.

Travel Stocks to Buy: Airbnb (ABNB)

A close-up shot of the Airbnb (ABNB) app on a smartphone screen.
A close-up shot of the Airbnb (ABNB) app on a smartphone screen.

Source: AngieYeoh / Shutterstock.com

Airbnb has become one of my favorite ways to travel. Sure, staying in a hotel is fun, but I’ve had some of my best travel experiences over the last couple of years staying in an Airbnb. I’ve gotten a beachside cottage in the Outer Banks and some funky lodging in Florida. Every stay I’ve had has been memorable and I’ve met some great people.

So, why wouldn’t I want to check out Airbnb the next time I travel?

ABNB stock went public a year ago and admittedly it wasn’t great timing. The public listing pretty much coincided perfectly with the beginning of the Covid-19 pandemic and people weren’t too interested in traveling.

But that’s not the case now.

In the most recent quarter, ABNB stock posted revenue of $2.2 billion, which was the highest in the company’s history. That was 36% better than the third quarter of 2019, and 70% than the third quarter of 2020.

Airbnb accounted for about 20% of the vacation rental industry before the pandemic began, so it’s likely that number is even greater now.

Expedia Group (EXPE)

building facade with expedia (EXPE) group logo
building facade with expedia (EXPE) group logo

Source: VDB Photos / Shutterstock.com

Admittedly, Booking Holdings (NASDAQ:BKNG) is the bigger and better-known online travel portal. But if you’re looking to make a bigger profit on travel stocks, I think Expedia is the better choice between the two.

Over the last two years, EXPE stock absolutely trounced Booking. EXPE stock is up more than 45% in the two-year period, while BKNG is up only 9%. So far this year, Expedia is up 21% while Booking is actually in the red.

In the third quarter, Expedia boasted sales of $2.96 billion, which was a 97% increase from a year ago. Earnings came in at $3.53, after the company posted a loss of 22 cents per share in the third quarter of 2020.

Expedia hit all-time highs in late November, but has since fallen 7% thanks to omicron. I expect EXPE stock will make that up pretty quickly and become one of the best travel stocks to buy.

Travel Stocks to Buy: American Express (AXP)

an American Express (AXP) credit card sticking out of someone's pocket
an American Express (AXP) credit card sticking out of someone's pocket

Source: Shutterstock

A lot of people will whip out their credit cards when they go on vacation. And sure, there are quite a few credit card stocks to choose from, so why is American Express the pick here?

Well, American Express caters to people who are more well off. Those are the people who are more likely to go on vacation, and to take advantage of AXP’s generous rewards programs for flights, hotels and other popular items when vacationing.

Plus. American Express makes 82% of its money from discount fees, card fees, travel-related commissions and what it calls “other revenue.” Only 18% of its money comes from interest.

American Express stock had a solid third quarter, beating analysts’ estimates on both revenue and profit. The company returned revenue of $10.9 billion and earnings of $2.27 per share.

Walt Disney Company (DIS)

Statue of Disney's (DIS) Mickey Mouse in Bangkok, Thailand.
Statue of Disney's (DIS) Mickey Mouse in Bangkok, Thailand.

Source: spiderman777 / Shutterstock.com

Nobody does entertainment quite like Disney. With the tagline “The Happiest Place on Earth,” Disney pulls out all the stops to make sure that people have a memorable time.

They even pump smells through their parks to give their guests the best experience. And it has huge mosquito prevention and monitoring program just so their guests aren’t bothered with pesky bites. I call that going above and beyond.

Disney also has renowned cruise ships and family-themed voyages for people who want to take the fun outside their mammoth theme parks.

DIS stock is down about 19% so far this year, and fell steeply after Q3 earnings missed analysts’ expectations on both earnings and revenue. Investors were also disappointed with the number new subscribers to the Disney+ streaming service.

But Disney has huge name recognition. And like Royal Caribbean in early 2020, DIS stock now qualifies as a beaten-down name with an established, loyal audience. I’m good with buying DIS stock on the dip here.

Travel Stocks to Buy: Hyatt Hotels (H)

an empty, sunlit hotel room
an empty, sunlit hotel room

Source: Shutterstock

I like Hyatt for a quick turnaround if omicron turns out to be a dud. In early November, H stock was at $95, but since fell about 7% on fears that lockdowns will begin again.

In the third quarter, H stock posted revenue of $851 million, which was less than analysts’ estimates of $860 million. It did manage a beat on earnings, showing $2.31 per share, while analysts had expected a loss of 39 cents per share.

According to Zacks, analysts are still expecting Hyatt to post sales of $1.08 billion in the fourth quarter. That would be a huge increase from a year ago, when the company showed sales of only $424 million.

Full-year sales are expected to be just over $3 billion, and then climb to between $4.26 billion to $5.74 billion in 2022.

Loop Capital analyst Daniel Adam recently upgraded the firm’s rating on H stock from hold to buy, and set a price target of $94.

Amadeus IT Group (AMADY)

AHT stock: the front of a hotel with ornate columns
AHT stock: the front of a hotel with ornate columns

Source: Shutterstock

Based in Spain, Amadeus IT Group is a way to play the infrastructure that supports global travel and tourism. Amadeus provides transaction processing power and technology support to full-service carriers, low-cost airlines, hotels, rail operators, cruise operators, car rental companies, and more.

It’s become the largest global distribution system provider in the world, with more than 90,000 travel agencies using its system. It’s a leading hotel booking platform in the Middle East and the north Africa region.

AMADY stock, which trades on the over-the-counter platform, had a choppy 2021 and is down roughly 18% on the year. Most of those losses came in the last few weeks, as omicron variant fears rattled travel companies again.

Should omicron fizzle quickly, AMADY stock will be one of those that see a quick turnaround. That gives it a place on this list of travel stocks to buy.

On the date of publication, Patrick Sanders did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.

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