IHT Wealth Management’s Yussef Gheriani believes now is a good time to consider adding travel plays to portfolios.
Between cabin fever related to the pandemic and optimism surrounding effective coronavirus treatments, Gheriani speculates bookings will start meaningfully rising within the next couple of months.
“People are going to be sitting down at home saying ‘Okay, it’s snowy outside. I want to get out. I need to get somewhere. I need to do something.’ And, they’re going to start booking those trips,” the firm’s director of investments told CNBC’s “Trading Nation” on Friday. “As an investor, you want to be positioned ahead of the company even starting to get the bookings.”
According to Gheriani, most travelers will look to book trips for late spring and the second half of next year — not the December holiday travel season. But he doesn’t think it will matter due to pent up demand.
“The companies are going to start seeing that kind of revenue coming in,” he said. “People are going to want to get out there, and go back and see family, go on vacations [and] get out of these cold states.”
Gheriani predicts a top destination will be the online travel operators.
“The people who you want to be with are your Expedias, your Booking Holdings — the people who have just a little bit more upside, and they have a little less downside,” he said. “They’re asset light. They don’t have a lot of things that are going to hold them back if Covid takes longer to recover.”
Shares of Expedia and Booking Holdings are off 28% and 6%, respectively, over the last 52 weeks. But they’ve bounced strongly off the March 23 low. Expedia has soared 97% since then while Booking Holdings has jumped 54%.
Gheriani, who helps oversee almost $5 billion in assets, is also bullish on airlines with or without another round of fiscal stimulus.
‘People are cooped up and want to get out’
“The airlines have a lot of opportunity to recover as people really want to get out there and travel.” said Gheriani. “People are cooped up and want to get out.”
His top airline play Southwest relies more on leisure rather than business travel — which is expected to take much longer to rebound. The stock is up 24% since the March 23 low, underperforming the broader S&P 500 which is up almost 51%.
But there’s one major exception to Gheriani’s bullish call: Cruise lines. Gheriani contends operators still have to maintain the boats whether or not they’re sailing. He also expects travelers will be slower to return to the seas than by air or land.
“Cruise lines are probably your highest risk play within vacation and people just getting back to travel,” Gheriani said. “These guys are burning cash on the daily.”
Disclosure: IHT Wealth Management’s clients own stocks mentioned in this report.