Travel stocks can be quite fickle because they depend heavily on several factors that the companies themselves can’t control. Things like like macroeconomic conditions and oil prices can have a massive impact on travel stocks, but that doesn’t mean that there aren’t long-term investment options in the space. Well-run, cost conscious, innovative companies are great stocks to buy no matter the industry and the travel sector is no exception.
This year is expected to be an especially profitable one for travel stocks due to favorable economic conditions and some of the Trump administration’s proposed policies.
Bigwigs like Warren Buffett have already jumped on board the trend by adding travel stocks to their portfolios.
Ryanair Holdings plc (ADR) (NASDAQ:RYAAY), Priceline Group Inc (NASDAQ:PCLN) and Southwest Airlines Co (NYSE:LUV) are three solid bets in the travel space because they have proven resilient and profitable through good times and bad.
Travel Stocks to Buy: Ryanair Holdings plc (ADR) (RYAAY)
European discount airline Ryanair is best known for offering ultra-low ticket prices in exchange for a bare-bones flights in which passengers have to pay for extras like food and luggage.
RYAAY stock has been struggling to move the needle over the last few months as worries about how the Brexit will impact the airline have weighed on sentiment. However, the Irish airline is extremely cost-efficient, which makes it well equipped to weather a macroeconomic storm.
Ryanair has very little debt compared to most of its airline peers and management has always had a laser focus on profits. Some argue that RYAAY will lose customers if the Brexit poorly affects the economy, but the airline might find itself making up for a loss in low-income passengers by taking on middle-income customers who are belt-tightening.
Travel Stocks to Buy: Priceline Group Inc (PCLN)
PCLN stock certainly isn’t cheap. One share of the travel website firm will set you back $1,771 and its price-to-earnings ratio is 41.
At first glance, Priceline’s price tag coupled with the amount of competition in its industry might make it seem like a poor choice, but the travel search engine has a lot going for it.
The number one reason PCLN is a stock to buy is the company’s massive presence in Europe.
Priceline operates Booking.com, which has quickly become a staple search engine for travelers in that area. Because many European hotels tend not to be part of a massive chain they gladly signed on with booking.com and so the site has become the first port of call for travelers who want to compare different hotels.
This has had a knock on effect, pushing even more hotel owners to get their businesses onto the site in order to attract customers. This approach has been successful for PCLN, and the firm’s solid positioning makes it a pretty sure bet.
Travel Stocks to Buy: Southwest Airlines Co (LUV)
U.S. budget airline Southwest is another great buy in the travel industry, especially right now. The company’s shares have fallen nearly 6% over the last week as investors worried about the firm’s less-than-stellar forward guidance for the first quarter. However, when it comes to U.S. airlines, Southwest is top-notch.
The firm has been able to increase its profits despite the fact that its peers have been struggling to keep their heads above water. Now, with unemployment levels improving and a possible corporate tax reduction on the table, the airline industry could be poised to deliver impressive gains, LUV included.
However, if things don’t improve for the sector, it’s a good idea to be holding a stock that is equipped to thrive in difficult conditions, and LUV is definitely one of those companies. The firm’s debt ratio is impressively low and its focus on delivering value while still keeping its ticket prices down means it has become a popular choice for middle-class travelers.