Traveling this weekend?
Forty-two million Americans are out there with you, according to AAA – which expects this to the third-busiest Memorial Day Weekend for travel (50 miles or more) since 2000.
Gas prices are down significantly – I’m sure you’ll recall what those were like last summer… But airline ticket prices are very much higher. And yet, flight bookings are 5% higher than the 2019 season, before Covid was even a thing.
Prices are definitely up for international travel – 30%, says AAA – but those bookings have tripled since 2022.
I’ll be visiting Paris in June with my family, and let me tell you: That tracks. Flights and hotels were filling up when I booked the trip.
I also recently flew into Baltimore, my publisher’s HQ, and it was business as usual. My team all sat side-by-side at desks and around the conference table with no fear of getting sick.
Even cruise ships – sort of the poster child for a potentially germy vacation – are seeing 50% more bookings than in 2022.
So, if you’re looking around this Memorial Day Weekend… seeing this trend play out on the ground (or on the road, I guess)… and wondering if travel stocks are a hot buy right now…
My Quantum Edge system has some very interesting findings for you.
Let’s take a look at the winners, the dark horses that have surprising strength, and the losers that haven’t quite caught up…
Winner in Travel: Hotels/Hospitality
On a scan of the entire Leisure sector, which also includes restaurants, meal delivery, casinos and gaming as well as travel… Booking.com (BKNG) is one of the highest ranked of the whole bunch.
Just check out these beautiful scores: BKNG gets 70.6 for its Technical score, which includes momentum indicators as well as Big Money buy signals from institutions… And an 83.3 on its Fundamentals.
I like to recommend stocks for my services like Quantum Edge Trader when the overall score falls between roughly 70 and 85 (above which it’s potentially overbought). And BKNG’s overall Quantum Score works out to 75.9 – right in my preferred buy range.
No big surprise there, given the seasonality and industry trends. Sites like Booking.com, Priceline and KAYAK (which the company also owns) cover pretty much every positive theme we discussed here.
But, of course, travel sites aren’t the only “Hospitality Service” that rates well now.
Marriott (MAR) is in the buy range, too, with Technicals of 67.6 and Fundamentals of 75 for an overall Quantum Score of 70.7.
Hilton (HLT) sits just below, with a Quantum Score of 69; Hyatt (H) and Choice Hotels (CHH) score similarly. But the timeshare business Hilton spun off in 2017, Hilton Grand Vacations (HGV), earns a strong 72.4, from a Technical score of 73.5 and a Fundamental score of 70.8:
Dark Horse in Travel: Cruise Ships
Cruise ships are perfect for this year’s traveler: People are eager to book vacations – but other forms of travel aren’t exactly a great value in these inflationary times.
But while the “Wave Season” (January through March) was kind to cruise lines, analysts aren’t quite sure the industry’s back to what it was before the pandemic.
So, when you add it all up… How are Carnival (CCL), Norwegian Cruise Line (NCLH) and Royal Caribbean (RCL) stocks looking now in my Quantum Edge system?
Well, Carnival is a great example of the split personality cruise stocks are showing us now:
CCL’s Technical score of 73.5 indicates that momentum is strong – as it should, with shares up 40% year-to-date… However, the Fundamentals get a 41.7, which is abysmal.
Overall, Carnival scores 60.3. Norwegian is similar, with strong Technicals and mediocre Fundamentals combining to a final Quantum Score of 62.1.
But here’s why I consider cruise stocks to be a dark-horse contender:
My Fundamental Score is more backward-looking – while my Technical Score is more forward-looking.
Think of it this way: When these companies publish their long list of quarterly metrics for sales, profits, engagement, cost savings… Then spend an hour patting themselves on the back in the earnings call (or making excuses, as the case may be)…
All of that has to do with last quarter. Lately, we’ve been sorting through company results from January through March. The future outlook, or “guidance,” is maybe one or two sentences in all of this.
But the Technicals – and, particularly, the Big Money buy and sell signals – show us how investors are positioning themselves for the future with these stocks. So, you can use it as a barometer for whether Wall Street firms, with their army of analysts, have concluded that the future is bright.
And Carnival stock shows multiple Big Money buy signals during Wave Season for the cruise lines:
Royal Caribbean is even better. RCL made it to my Top 20 stocks I recommended for institutional and hedge-fund clients in mid-May after racking up Big Money buy signals all year… 10 of them, versus just one sell:
This Wave Season was a record-setter for Royal Caribbean. First-quarter revenues were up 172%, year over year, but best of all, booking volume was much higher than the 2019 quarter, we learned in the May 4 report.
And as we saw from RCL’s sharp rally in the chart above, Wall Street liked this quite a bit. So, while its Fundamentals rate just 58.3 (for now), its Technicals are running hot at 91.2.
Loser in Travel: Airlines
The split-personality of these cruise ship stocks jumps out at you all the more when you compare to, say, the airline stocks… whose Quantum Scores tell a very different tale.
According to my Quantum Edge system, American Airlines (AAL), Delta Air Lines (DAL) and United Airlines (UAL) all have Fundamentals roughly in the 50s – just like cruise ships – but Technicals that tend to be lower, around 65. UAL is the best of the bunch, with Technicals of 73.5 combining with Fundamentals of 54.2 for an overall 65.5.
But just look at Southwest Airlines (LUV). It actually has the best Fundamentals of the four, at 62.5 – but its Technicals are practically on the floor, at 23.5.
Revenues were up 21.6%, but Wall Street was not impressed that Southwest reported negative “earnings” for Q1 of -$0.27, even worse than the -$0.23 that analysts had projected.
Southwest executives gave a laundry list of obscure reasons for this: Losses were “driven primarily by operational disruption-related expenses [in December], including travel expense reimbursements to customers and an increase in the expected redemption rate of Rapid Rewards points.”
And it can’t be helping sentiment that Southwest pilots are threatening to go on strike for higher wages. Wall Street’s view is pretty clear on LUV’s chart, with four Big Money sells as the stock bleeds lower all year:
Bottom Line on Travel & Leisure
It just goes to show that it pays to be choosy with your stocks – even in an exciting turnaround like Travel & Leisure are experiencing now.
So, I’ll leave you with a few top scorers to consider if you’re looking to get involved with the travel-stock play this summer:
Either way, you can also take this as further confirmation:
The gloom and doom that bears are still trying to sell you in the media just isn’t warranted… Not when consumers are spending on plenty of summer fun, as usual. And that bodes well for stocks in the remainder of the year.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
Disclosure: On the date of publication, Jason Bodner held a position in Booking Holdings (BKNG), mentioned in this article.
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