Barron’s Weekend Summary: Six travel and leisure companies stand to benefit from a vaccine-driven rebound in demand
* Cover Story: Positive on WH, NCLH, CZR, VAC, STAY, WYNN: The travel and tourism sector took a massive hit during the pandemic, but some companies have done well recently based on the release of coronavirus vaccines and the belief that travel is set to resume, and they stand to continue benefiting as the pandemic winds down and vaccines are rolled out in increasingly larger numbers.
* Tech Trader: Columnist Eric Savitz says he finds the notion of AAPL becoming a full-fledged automaker to be far-fetched, despite the idea’s obvious appeal—the global auto market had sales of more than $2T last year, making it hard for Apple to ignore—because the company’s expertise is in design, engineering, logistics, and marketing, not in manufacturing.
*Trader: Market technicals suggest that small-caps need some time to cool down—the Russell 2000 traded more than 30 percent above its 200-day moving average this past week, the largest gap on record, according to the Bear Traps Report’s Larry McDonald.
* Interview: Neel Kashkari, chief of the Minneapolis Federal Reserve, talks about the bank’s need to look at disparities across all sectors, as well as the plunge in bond yields and the Fed’s tools, including lending facilities.
* Features: 1) +/- BABA: Beijing continues to target the Chinese e-commerce giant and its leader, billionaire Jack Ma—Raymond James analyst Aaron Kessler says the tricky part with Alibaba will be quantifying the hit to revenue, if any, and that Chinese regulators are likely to go after other companies; 2) Cautious on DAL, LUV, ALGT, RYAAY, GOL: Airline stocks are up as vaccine approvals boost hopes for travel, so they are no longer bargains—the sector has gained 39 percent since early November, versus 13 percent for the S&P 500, and while a few stocks look appealing as longer-term bets, investors “might need to ride out some turbulence”; 3) Positive on YELP: Shares lost 20 percent of their value this year, underperforming the Nasdaq Composite index by more than 60 percentage points, but changes to the company’s business model and hopes of a reopening economy—along with promised buybacks—could send the stock higher; 4) Positive on POOL: Shares of the company, which distributes swimming pool supplies and maintenance equipment, have had a rough ride lately, but continuing lockdowns create “an opportunity for investors to buy into an industry leader with a remarkably stable growth outlook,” since pools will always need maintenance, pandemic or not.
* European Trader: Positive on BASF: Shares of the world’s largest publicly traded chemicals maker have fallen during the past five years amid weak demand and growing competition from China, but a focus on increasing profit margins by developing new products downstream and divesting lower priced products is paying off, and should lead to growth.
* Emerging Markets: Companies in the electric vehicle, e-commerce, and social media sectors in emerging markets are outperforming top players in the US, but their high valuations are making some investment managers nervous, and growing competition from within the EM sector could shake up the landscape, such that hot stocks may “take a breather heading into 2021.”
* Commodities: “Recent unseasonably dry weather in South America, and worries that the lack of moisture will continue, could propel soybean prices more than 40 percent higher in the first quarter of 2021. “
* Streetwise: For most investors seeking to play the fitness boom, “the choice is among already-listed companies that still look reasonably priced, like maybe NLS; or indirect exposure, like with LULU; or even less direct exposure, through Big Tech.”