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Reopening trade: Here's what investors should watch

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AdvisorShares Investments Founder and CEO Noah Hamman joins Yahoo Finance Live to discuss the latest market action.

Video Transcript

- As we saw in that latest report from EIA, the crude inventories actually rose much larger than expected there, a rise in terms of stocks by about six million barrels in that report. That was quite a bit above the expectations of a million. And we saw oil prices fall on that but still holding above the $80 mark.

And the implications there, of course, much larger than just the energy patch as we look at prices across a number of service areas. As well as pieces of the economy when we talk about travel as we were earlier in the week. When it comes to airline tickets and what we could see in terms of price increases. And for more on all of that and how it's impacting the rest of the economy, I want to bring out our next guest, Noah Hamman, AdvisorShares Investment founder and CEO joins us right now.

And Noah, in your notes, it was interesting to see the bifurcation in some of these, I guess, value side, cyclical side trades. You're looking at the restaurants, hotels, and airlines. Hotels, kind of the weird outlier there that hasn't been beaten down as much, and I suspect a piece of that is because it's less levered to oil price.

NOAH HAMMAN: I think that is true. They don't have the same kind of supply chain issues. Restaurants have got to get food to it, energy related to the airlines. You don't really have that so much in hotel, it's beds that linens. And there's food in the restaurants, of course, and things like that.

I do think there's also something unique about it as it relates to this reopening trade which is, at least in a hotel, you can go travel, maybe somewhat local. Stay in the room, trust that it's clean, but you're not in a big, enclosed environment. So restaurants, you still have people nervous to go into those things. Airplanes, the same thing. Business travel really hasn't even picked up yet.

So, interesting to see that, yes, over the near term, you've got a pretty big difference with beds and eats and jets. Those are the three ETFs that represent that. And so by far, beds has been the top performer of those three.

- Noah, that's interesting to me because I would think that people would go to restaurants first before they begin the travel itself. But, I mean, what are we seeing in terms of the challenges facing the restaurant side then if that's not necessarily what we're seeing?

NOAH HAMMAN: I think it might be a function of the difference of what's a public restaurant company, maybe what's a local restaurant company. And certainly, your local restaurants, small business owners have really struggled through the pandemic. But at the same time, I feel like we've all kind of rallied around it.

I'm particular about what restaurants I'm either going to or ordering from. And for the restaurants, either way, it all counts as revenue. So I think that while restaurants have probably had that activity, the bigger chains which have struggled with supply chain. And have struggled with finding hospitality workers in that industry, I think maybe that's what you've seen reflected in the differences in the performance.

- I guess. It raises larger questions about what's working here as we wrap up 2021. It's been a constant back and forth between growth names and cyclical names.

And then of course, as you're drilling down here, which piece of the cyclical trade do you really want to lean in on? And I suppose moving forward now, as we get past hopefully this last stretch of the Delta variant here on the COVID front, and vaccines continue to roll out. I mean, it's been a weird back and forth, but which ones are you seeing maybe the most confidence in terms of investors ramping up to end the year?

NOAH HAMMAN: Well, certainly probably of the three, I mean, it feels like it's airlines, though they really have struggled. But they have probably the most flexibility. I've just been traveling the last few days, and the price variability that you have in terms of when you fly and where you're flying, I think, gives them probably the most control. And to manage those margins and their rebound.

Probably hotels is next. They have a lot of variability in their ability to change their prices and adjust it accordingly, account for those increasing costs they have with cleaning. And being more competitive to hire those hospitality workers in terms of their salaries.

And then it's probably restaurants, I think, from there. I feel like I've definitely seen restaurants making small adjustments to account for the cost for them to operate, whether that-- you've seen that in an upcharge or a delivery charge when you're ordering it for delivery. Or I've seen it in just little things that kind of stand out for you where fries used to come with the hamburger. And now that's another $3, and it gives them a little bit more control.

But it feels like the airlines maybe have the most control over pricing and the ability to use tools with energy futures and things like that to help manage those costs. But I'm optimistic, as you said, with things kind of calming down. And it feels like we really are getting better. We're not talking about deaths and head counts and things like that. All three sectors, we think, can open up a real strong economy and they'll both do-- all three will do really well.

- Well, we did it. We did a segment without talking cannabis here. But we're going to have to have you back as we look ahead to those earnings here. But Noah Hamman, AdvisorShares Investment founder and CEO, appreciate you taking the time as always.