Spring is upon us and vacation season is right around the corner. More importantly, the conditions for a strong U.S. travel season are present. And this could benefit several travel stocks. In this post, we’ll preview four travel stocks with solid setups.
First, let’s look at the fundamental backdrop heading into springtime.
Points of interest:
- A strong dollar encourages US citizens to travel abroad.
- On the flip side tourism to the U.S. may be in for an awful year. Which side holds a heavier weight?
- The fall in gas prices provides further encouragement to soon-to-be travelers.
- A strong employment picture is a further boost, but wage growth is tepid.
- 2015 is on track to be the best year ever for hotel occupancy.
Hotel Occupancy Seasonality Chart
chart source: Calculated Risk and Smith Travel Research
Looking at the Dow Jones Travel & Tourism Index, we can see that it blasted higher in March, before re-testing its 10-week moving average. This is constructive price action, but the index will need to show it can hold above the 3 key moving averages in the chart below.
As well, the index is below its 2014 and 2015 highs. The trend is currently neutral and investors will want to watch the blue downtrend line to see if the Index perks up as we head into travel season.
Dow Jones Travel & Tourism Index Chart
Top Travel Stocks On My Radar
When thinking of travel stocks, a few immediately come to mind, but none bigger than ‘big daddy’ Priceline (PCLN). Note that this sector leader is basically tracking the Tourism Index. There’s an open gap below at 1130 that may get filled if PCLN heads lower. On the upside, Priceline will have a big test at trend resistance around 1240.
Priceline (PCLN) Stock Chart
Another interesting name in among travel stocks is Trip Advisor (TRIP). Its stock price recently gapped higher on strong earnings but has given some of that back in recent weeks. A catalyst for recently selling was an analyst downgrade last week. However, the stock quickly reversed higher after testing its 50 day moving average. Now, price is compressed between the 10 and 40 week moving averages.
Trip Advisor (TRIP) Stock Chart
Cruise liner Carnival (CCL) is one of my top picks of 2015. It continues to trade well after breaking out above a 10-year base. This type of relative strength bodes well for the upcoming travel season.
Carnival (CCL) Stock Chart
There are plenty of creative ways to play this strong seasonal trend as well. For example, I’m a big NASCAR fan, so I’ll be heading to Michigan International Speedway.
General economic conditions are making it easier for NASCAR fans to travel across the country to visit their favorite tracks. International Speedway Corp (ISCA) operates premier tracks such as Daytona, Darlington, Richmond, Michigan and Talladega.
In their latest conference call, ISCA noted a turn in their core consumer (the lower / middle class).
“I think that where consumer confidence for our demographic is finally starting to get a little sunshine in there. And people are feeling better about returning to their pockets and spending for more discretionary things…that they been putting off for a while”
Obviously, the cash strapped consumer is the one who is seeing the biggest rate of change in their fortunes. So focusing on the low-to-middle end traveler appears be the best way to play the season.
One example is the cheap hotel room trade. Of the travel stocks in this regard, I like Wyndham Worldwide (WYN). It has formed a nice base above its 10 week moving average which could set up a continuation trade higher.
Wyndham Worldwide (WYN) Stock Chart
To summarize, the broad tourism plays are pretty neutral right now, but there are some niche ways to play the group into travel season, especially if the seasonal trends for 2015 stay true to form. Thanks for reading!
Follow Aaron on Twitter: @ATMcharts
No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
