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Best Travel Stocks That Should Be on Your Radar

The best travel stocks to invest in will give you the opportunity to enhance and diversify your portfolio based on the current market.
The post Best Travel Stocks That Should Be on Your Radar appeared first on Investment U.

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COVID-19 has had a significant negative impact on the travel industry. With the Delta variant having travelers questioning their vacation plans, many companies have suffered a second wave of profit loss. This has no doubt caused investors to question what the best travel stocks to buy are, if any at all. Tons of travelers are postponing trips again. There are many reasons to be concerned about investing in travel stocks right now.

However, if you look towards the short-term, say six months from now, many analysts believe the travel industry will rebound. Even though many travelers are postponing, there are still a good number of people tired of being stuck at home and are eager to get out. When we start to see some sort of normalcy return, there are few best travel stocks that should be on your radar.

Best Travel Stocks

Delta Air Lines, Inc (NYSE: DAL)

Delta is a leader in domestic and international travel. It’s one of the major airlines of the U.S. Once again proving it deserves to be known as the leader in its industry. Delta has ranked number one in reliability and experience, putting it on top for the third year in a row.

With COVID-19 numbers on the rise, many companies in the air travel industry have been suffering. Delta has experienced much turbulence due to the pandemics cause of demand problems. However, many people are tired of continuing to cancel their long-awaited reunions with family and loved ones due to the Delta variant.

And according to a recent survey, 26% of people say they plan to travel in October. It won’t be long before people get that itch to travel again. And when they do, Delta will surely be on investors lists of best travel stocks. As people look to reconnect and explore new destinations, the travel industry stands to benefit. In the U.S., air travel has hit two million daily passengers. This number is much higher than the low of around 90,000 daily passengers in April 2020.

CEO, Ed Bastian sees a light at the end of the tunnel for Delta. He event went as far as to comment, “Domestic leisure travel is fully recovered to 2019 levels.” Individual business travel is at about 43% of 2019 levels, but analysts are confident it will climb back up to 79% in 2022. It’s expected to be at full recovery by 2024.

Nobody knows what’s going to happen. But when things start opening up again and people get antsy being cooped up indoors, there’s one thing a good number of them will want to do… travel. The travel industry will surely benefit from this and Delta stands to profit.

Airbnb (Nasdaq: ABNB)

Airbnb operates an online marketplace for lodging, with a focus on homestays for vacation rentals and tourism activities. After being hit hard by COVID-19, Airbnb is set to soar post-pandemic. It’s definitely a company that should be on your list of best travel stocks.

Due to the increase in remote workers, the company could stand to benefit in the long-term. The company reduced expenses, so it will likely operate more efficiently in the aftermath. As long as people have internet connection, they can work anywhere.

Even though its shares fell 30% over the past six months, analysts have been growing more bullish. Following the company’s earnings report last week, a few analysts reiterated buy ratings on the stock and increased their 12-month price targets. In addition, one analyst reaffirmed an outperform rating for shares.

Airbnb has been demonstrating strong cash flow. And paired with its scalable business model, a $93 billion market cap doesn’t seem too expensive for a growing company.

During a call with analysts, CEO Brian Chesky magnified the company’s sales growth, projecting that the Airbnb’s next quarter will be “our strongest revenue quarter ever.” He went on to say that it “speaks to the inherent resiliency of our business.”

Airbnb’s “funds receivable” account increased from $4.4 billion in Q2 of 2019 to $6.3 billion in Q2 of 2021. The account is defined as the amount that Airbnb holds on behalf of customers who have made a reservation for the future, but have not yet taken their trip. This 43% increase indicates that people are ready to travel, despite the Delta variant. And it makes a strong case for what’ll be happening six months from now.

Airbnb seems like a risk vs. reward scenario that’s worth taking.

Marriott International (Nasdaq: MAR)

What’s next for this hotel giant post-pandemic? According to Marriott CEO Tony Capuano, “We’re actually seeing really strong recovery of demand in a variety of our largest markets. He went on to say that “it’s not just leisure demand, which is the thing that is really encouraging for us.” This strong recovery might just be the deciding factor in investors considering it to be one of the best travel stocks this year.

COVID-19 caused historic levels of low occupancy for the travel and hotel industry. It prompted massive job cuts and hotel closures. Marriott, the world’s largest hotel operator, took a massive hit during the pandemic, recording its first full-year loss in more than a decade.

Like many of its competitors, the company has introduced new cleaning procedures to entice travelers. It even cut back on offerings in an effort to return to profitability. Marriott’s efforts were apparent in its second-quarter results. The company’s net income soared to $422 million from a net loss of $234 million just a year earlier.

Travelers are venturing out again. An estimated 48 million Americans traveled during the busy Fourth of July weekend. Yes, that was before COVID-19 cases began to spike again. But it’s only a matter of time before people begin traveling again and once business travel starts up again, hotels along with airlines will surely stand to profit.

Walt Disney Co (NYSE: DIS)

Disney is one company that has definitely been hit hard throughout the pandemic. When things were looking better and travel bans were being lifted, many travelers flocked to Disney with their friends and family. Disney recently saw a huge spike in sales and net income since before the pandemic. The multinational mass media and entertainment giant recently announced a 45% sales spike for the fiscal third quarter.

After being shutdown many times throughout these past 17 months, Disney’s parks are now open. The company instituted price increases at its parks that could make them more profitable than before the pandemic. With many travelers making Disney their vacation destination, it’s no wonder why investors are keeping this stock on their radar as one of the best travel stocks.

Theme parks and products revenue nearly quadrupled to $4.3 billion as resorts opened back up. Disney estimates the segment will see operating income increase by $2.2 billion in the current quarter. Analysts are expecting earnings per share (EPS) to rise 18% in the current fiscal year, followed by a 112% jump in fiscal 2022.

All of this uncertainty is creating an opportunity for long-term investors to buy Disney stock. The company will only continue to please its customers and investors, regardless of the volatility in the near term.

Investing in the Travel Industry

With so much uncertainty out there, there’s really no way of knowing what will happen in the near future. However, what we do know is that people will feel the need to take off and go on vacation. Being at home 24/7 has not been easy for everyone. Reports have already shown that travelers are putting on their exploring hats and are hiking or flying to their next adventure.

Delta, Airbnb, Marriott and Disney are the best travel stocks that stand to benefit from the new travel surge we will most likely be seeing in the short term. Many investors have been skeptical regarding the travel industry but when travel and tourism start picking back up, you will want to be positioned to profit.

There is so much to learn about stocks and investing. What stocks should I buy? How can I best tackle the uncertainty of the stock market? These are questions many investors, new and seasoned, ask themselves. So, if you’re ready to begin or continue your trading journey, it’s time you sign up for Trade of the Day. This FREE e-letter provides analysis, tips and more from two of the best trading experts, Bryan Bottarelli and Karim Rahemtulla. Click here to sign up now!

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There Goes The Fed’s Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

There Goes The Fed’s Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

Two years ago, we first said that it’s only a matter…

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March 19, 2024

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There Goes The Fed's Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

Two years ago, we first said that it's only a matter of time before the Fed admits it is unable to rsolve the so-called "last mile" of inflation and that as a result, the old inflation target of 2% is no longer viable.

Then one year ago, we correctly said that while everyone was paying attention elsewhere, the inflation target had already been hiked to 2.8%... on the way to even more increases.

And while the Fed still pretends it can one day lower inflation to 2% even as it prepares to cut rates as soon as June, moments ago Goldman published a note from its economics team which had to balls to finally call a spade a spade, and concluded that - as party of the Fed's next big debate, i.e., rethinking the Neutral rate - both the neutral and terminal rate, a polite euphemism for the inflation target, are much higher than conventional wisdom believes, and that as a result Goldman is "penciling in a terminal rate of 3.25-3.5% this cycle, 100bp above the peak reached last cycle."

There is more in the full Goldman note, but below we excerpt the key fragments:

We argued last cycle that the long-run neutral rate was not as low as widely thought, perhaps closer to 3-3.5% in nominal terms than to 2-2.5%. We have also argued this cycle that the short-run neutral rate could be higher still because the fiscal deficit is much larger than usual—in fact, estimates of the elasticity of the neutral rate to the deficit suggest that the wider deficit might boost the short-term neutral rate by 1-1.5%. Fed economists have also offered another reason why the short-term neutral rate might be elevated, namely that broad financial conditions have not tightened commensurately with the rise in the funds rate, limiting transmission to the economy.

Over the coming year, Fed officials are likely to debate whether the neutral rate is still as low as they assumed last cycle and as the dot plot implies....

...Translation: raising the neutral rate estimate is also the first step to admitting that the traditional 2% inflation target is higher than previously expected. And once the Fed officially crosses that particular Rubicon, all bets are off.

... Their thinking is likely to be influenced by distant forward market rates, which have risen 1-2pp since the pre-pandemic years to about 4%; by model-based estimates of neutral, whose earlier real-time values have been revised up by roughly 0.5pp on average to about 3.5% nominal and whose latest values are little changed; and by their perception of how well the economy is performing at the current level of the funds rate.

The bank's conclusion:

We expect Fed officials to raise their estimates of neutral over time both by raising their long-run neutral rate dots somewhat and by concluding that short-run neutral is currently higher than long-run neutral. While we are fairly confident that Fed officials will not be comfortable leaving the funds rate above 5% indefinitely once inflation approaches 2% and that they will not go all the way back to 2.5% purely in the name of normalization, we are quite uncertain about where in between they will ultimately land.

Because the economy is not sensitive enough to small changes in the funds rate to make it glaringly obvious when neutral has been reached, the terminal or equilibrium rate where the FOMC decides to leave the funds rate is partly a matter of the true neutral rate and partly a matter of the perceived neutral rate. For now, we are penciling in a terminal rate of 3.25-3.5% this cycle, 100bps above the peak reached last cycle. This reflects both our view that neutral is higher than Fed officials think and our expectation that their thinking will evolve.

Not that this should come as a surprise: as a reminder, with the US now $35.5 trillion in debt and rising by $1 trillion every 100 days, we are fast approaching the Minsky Moment, which means the US has just a handful of options left: losing the reserve currency status, QEing the deficit and every new dollar in debt, or - the only viable alternative - inflating it all away. The only question we had before is when do "serious" economists make the same admission.

They now have.

And while we have discussed the staggering consequences of raising the inflation target by just 1% from 2% to 3% on everything from markets, to economic growth (instead of doubling every 35 years at 2% inflation target, prices would double every 23 years at 3%), and social cohesion, we will soon rerun the analysis again as the implications are profound. For now all you need to know is that with the US about to implicitly hit the overdrive of dollar devaluation, anything that is non-fiat will be much more preferable over fiat alternatives.

Much more in the full Goldman note available to pro subs in the usual place.

Tyler Durden Tue, 03/19/2024 - 15:45

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Household Net Interest Income Falls As Rates Spike

A Bloomberg article from this morning offered an excellent array of charts detailing the shifts in interest payment flows amid rising rates. The historical…

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2 hours ago

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March 19, 2024

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A Bloomberg article from this morning offered an excellent array of charts detailing the shifts in interest payment flows amid rising rates. The historical anomaly was both surprising and contradicted our priors.

10 Key Points:

  1. Historical Anomaly: This is the first time in the last fifty years that a Federal Reserve rate hike cycle has led to a significant drop in household net interest income.
  2. Interest Expense Increase: Since the Fed began raising rates in March 2022, Americans’ annual interest expenses on debts like mortgages and credit cards have surged by nearly $420 billion.
  3. Interest Income Lag: The increase in interest income during the same period was only about $280 billion, resulting in a net decline in household interest income, a departure from past trends.
  4. Consumer Debt Influence: The recent rate hikes impacted household finances more because of a higher proportion of consumer credit, which adjusts more quickly to rate changes, increasing interest costs.
  5. Banks and Savers: Banks have been slow to pass on higher interest rates to depositors, and the prolonged period of low rates before 2022 may have discouraged savers from actively seeking better returns.
  6. Shift in Wealth: There’s been a shift from interest-bearing assets to stocks, with dividends surpassing interest payments as a source of unearned income during the pandemic.
  7. Distributional Discrepancy: Higher interest rates benefit wealthier individuals who own interest-earning assets, whereas lower-income earners face the brunt of increased debt servicing costs, exacerbating economic inequality.
  8. Job Market Impact: Typically, Fed rate hikes affect households through the job market, as businesses cut costs, potentially leading to layoffs or wage suppression, though this hasn’t occurred yet in the current cycle.
  9. Economic Impact: The distribution of interest income and debt servicing means that rate increases transfer money from those more likely to spend (and thus stimulate the economy) to those less likely to increase consumption, potentially dampening economic activity.
  10. No Immediate Relief: Expectations for the Fed to reduce rates have diminished, indicating that high-interest expenses for households may persist.

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One more airline cracks down on lounge crowding in a way you won’t like

Qantas Airways is increasing the price of accessing its network of lounges by as much as 17%.

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2 hours ago

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March 19, 2024

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Over the last two years, multiple airlines have dealt with crowding in their lounges. While they are designed as a luxury experience for a small subset of travelers, high numbers of people taking a trip post-pandemic as well as the different ways they are able to gain access through status or certain credit cards made it difficult for some airlines to keep up with keeping foods stocked, common areas clean and having enough staff to serve bar drinks at the rate that customers expect them.

In the fall of 2023, Delta Air Lines  (DAL)  caught serious traveler outcry after announcing that it was cracking down on crowding by raising how much one needs to spend for lounge access and limiting the number of times one can enter those lounges.

Related: Competitors pushed Delta to backtrack on its lounge and loyalty program changes

Some airlines saw the outcry with Delta as their chance to reassure customers that they would not raise their fees while others waited for the storm to pass to quietly implement their own increases.

A photograph captures a Qantas Airways lounge in Sydney, Australia.

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This is how much more you'll have to pay for Qantas lounge access

Australia's flagship carrier Qantas Airways  (QUBSF)  is the latest airline to announce that it would raise the cost accessing the 24 lounges across the country as well as the 600 international lounges available at airports across the world through partner airlines.

More Travel:

Unlike other airlines which grant access primarily after reaching frequent flyer status, Qantas also sells it through a membership — starting from April 18, 2024, prices will rise from $600 Australian dollars ($392 USD)  to $699 AUD ($456 USD) for one year, $1,100 ($718 USD) to $1,299 ($848 USD) for two years and $2,000 AUD ($1,304) to lock in the rate for four years.

Those signing up for lounge access for the first time also currently pay a joining fee of $99 AUD ($65 USD) that will rise to $129 AUD ($85 USD).

The airline also allows customers to purchase their membership with Qantas Points they collect through frequent travel; the membership fees are also being raised by the equivalent amount in points in what adds up to as much as 17% — from 308,000 to 399,900 to lock in access for four years.

Airline says hikes will 'cover cost increases passed on from suppliers'

"This is the first time the Qantas Club membership fees have increased in seven years and will help cover cost increases passed on from a range of suppliers over that time," a Qantas spokesperson confirmed to Simple Flying. "This follows a reduction in the membership fees for several years during the pandemic."

The spokesperson said the gains from the increases will go both towards making up for inflation-related costs and keeping existing lounges looking modern by updating features like furniture and décor.

While the price increases also do not apply for those who earned lounge access through frequent flyer status or change what it takes to earn that status, Qantas is also introducing even steeper increases for those renewing a membership or adding additional features such as spouse and partner memberships.

In some cases, the cost of these features will nearly double from what members are paying now.

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