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Trump and Travel Stocks: A Winning Combination?

Tracey Ryniec
  • (0:45) - Mexico Vacations: Tourism Declines
  • (6:55) - United States Tourism
  • (9:20) - Should you invest in travel stocks?
  • (12:00) *Investing Ideas*
  • (15:00) - Airline Stocks
  • (17:10) - Timeshare Stocks
  • (19:00) - Episode Round up: Ticker Summary

Welcome to Episode #73 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by John Blank, Zacks Chief Equity Strategist and Editor of Zacks Large Cap Trader, for a discussion about the travel industry under the Trump Administration.

Trump’s Impact on Mexico Tourism

Both Tracey and John recently took vacations to Mexico, with John traveling by car down the Baja and Tracey flying into Playa del Carmen on the Yucatan peninsula.

John traveled to see the gray whales and was surprised to see that many of the boats that should have been full with nature-loving tourists, mostly from Europe, were empty.

Tracey talked to a restauranteur in town who said that business plunged in January after Trump’s initial executive order restricting travel from 7 countries and after the Trump Administration’s comments about free trade and building the wall.

US Tourism Could Lose Too

Back in the United States, New York City has already said it could lose 300,000 tourists a year thanks to negative sentiment about traveling to the United States.

Additionally, some economists estimate that between $50 billion and $70 billion could be lost due to tourists deciding not to visit America. That could impact thousands of jobs.

With all of this uncertainty, is now a good, or a bad, time to be investing in the travel stocks?

Tracey and John look at the online travel agents as well as a few of the airlines.

Investment Ideas in the Travel Industry

1.       Priceline PCLN is the king of online travel. Shares have been hitting new all-time highs and trade with a forward P/E of 23, but it still has double digit earnings growth. Is it still a buy?

2.       Expedia EXPE is more expensive, at 30x, but its earnings growth is also stronger than Priceline’s. Earnings are expected to rise 22.6% in 2017 and another 37.5% in 2018. Watch for an upward revision in earnings estimates as it’s a Zacks #5 (Strong Sell) right now.

3.       Southwest LUV has blamed bad weather in California for a slowing this quarter. When does that ever happen?

4.       American Airlines AAL is one of the cheaper domestic carriers with a forward P/E of 9. But should you be buying domestic or international airlines, or neither, right now?

5.       International Airlines Group ICAGY might not be familiar to you, but you would know its brands. It flies about 550 aircraft under the British Airways, Iberia, Aer Lingus and Vueling logos. Europe’s economy is heating up. When the economy is stronger, people travel more.

Another area to look for ideas in are the timeshare companies. Yes, timeshare companies are again seeing record revenue. In spite of a challenge from Airbnb, consumers are still buying timeshares.

There are other travel areas investors should consider including the cruise ship companies and hotel chains.

What else do Tracey and John think about the travel industry and investing in 2017?

Find out the answer to this and more on this week’s podcast.

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Southwest Airlines Company (LUV): Free Stock Analysis Report
International Consolidated Airlines Group SA (ICAGY): Free Stock Analysis Report
Expedia, Inc. (EXPE): Free Stock Analysis Report
The Priceline Group Inc. (PCLN): Free Stock Analysis Report
American Airlines Group, Inc. (AAL): Free Stock Analysis Report
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