As lockdowns and travel restrictions continue to be lifted in some parts of the world despite the spread of variants of the Covid-19 virus, people are itching to get out and about after months of being cooped up.
While most nonessential international travel for noncitizens is still being restricted by the U.S., the Biden administration is facing increasing pressure from other countries as well as airlines to ease up on its limitations.
Travel-related stocks, including airlines, travel agencies and hospitality providers, have been battered by lower demand throughout the pandemic, sinking their revenue as well as share prices. With the imminent increase in foreign as well as domestic travel ahead, these industries are poised to benefit.
Based on these developments, investors may be looking for opportunities in the travel sector that gurus also see value in. According to the Aggregated Portfolio, a Premium feature, as of July 29, travel companies that are popular among gurus include Booking Holdings Inc. (BKNG, Financial), Expedia Group Inc. (EXPE, Financial), Royal Caribbean Group (RCL, Financial), Norwegian Cruise Line Holdings Ltd. (NCLH, Financial) and TripAdvisor Inc. (TRIP, Financial).
According to GuruFocus’ Industry Overview, several of these companies are major players in the travel and leisure sector.
Booking Holdings
With a combined equity portfolio weight of 33.81%, 28 gurus are invested in Booking Holdings (BKNG, Financial).
The Norwalk, Connecticut-based company, which owns and operates several travel and reservation booking sites like Booking.com, Agoda, OpenTable and Kayak, has a $91.52 billion market cap; its shares were trading around $2,227.11 on Thursday with a price-earnings ratio of 130.36, a price-book ratio of 19.21 and a price-sales ratio of 16.21.
The GF Value Line suggests the stock is significantly overvalued currently based on historical ratios, past performance and future earnings projections.
GuruFocus rated Booking’s financial strength 4 out of 10. As a result of issuing approximately $7.6 billion in new long-term debt over the past three years, the company has weak interest coverage. The Altman Z-Score of 5.1, however, indicates it is in good standing despite recording losses in operating income over the past several years. The return on invested capital has also fallen below the weighted average cost of capital, suggesting the company struggles to create value while growing.
The company’s profitability fared better, scoring a 7 out of 10 rating. Although the operating margin is in decline, Booking is supported by returns on equity, assets and capital that outperform over half of its competitors. It also has a low Piotroski F-Score of 3, indicating business conditions are in poor shape. The predictability rank of one out of five stars is also on watch as a result of revenue per share declining over the past five year. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Booking, Dodge & Cox has the largest holding with 2.23% of outstanding shares. Other top guru shareholders include Pioneer Investments (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Hotchkis & Wiley and First Pacific Advisors (Trades, Portfolio).
Expedia
Ten gurus have positions in Expedia (EXPE, Financial), representing a combined weight of 3.02%.
The hotel, airplane and rental car booking service, which is headquartered in Seattle, has a market cap of $24.06 billion; its shares were trading around $164.44 on Friday with a price-book ratio of 128.62 and a price-sales ratio of 5.52.
According to the GF Value Line, the stock is significantly overvalued currently.
Expedia’s financial strength was rated 3 out of 10 by GuruFocus. The Altman Z-Score of 0.48 warns the company could be at risk of going bankrupt.
The company’s profitability scored a 5 out of 10 rating on the back of negative margins and returns that underperform a majority of industry peers. Expedia also has a low Piotroski F-Score of 2 and the one-star predictability rank is on watch as a result of revenue per share declining over the past several years.
With 0.53% of outstanding shares, Steven Cohen (Trades, Portfolio) is the company’s largest guru shareholder. Stanley Druckenmiller (Trades, Portfolio), Pioneer, Louis Moore Bacon (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) also have positions in Expedia.
Royal Caribbean
Holding a combined portfolio weight of 0.91%, nine gurus have positions in Royal Caribbean (RCL, Financial).
The Miami, Florida-based cruise line operator has a $20.81 billion market cap; its shares were trading around $81.71 on Thursday with a price-book ratio of 2.26 and a price-sales ratio of 81.2.
Based on the GF Value Line, the stock appears to be significantly overvalued currently.
GuruFocus rated Royal Caribbean’s financial strength 2 out of 10. As a result of issuing approximately $11.6 billion in new long-term debt over the past three years, the company has weak interest coverage. The Altman Z-Score of 0.33 also warns the cruise line could be in danger of going bankrupt as it has recorded losses in operating income over the past several years.
The company’s profitability scored a 5 out of 10 rating as a result of negative margins and returns that underperform a majority of competitors. Royal Caribbean is also being weighed down by a low Piotroski F-Score of 2 and a decline in revenue per share over the past several years has caused the one-star predictability rank to be on watch.
PRIMECAP Management (Trades, Portfolio) is Royal Caribbean’s largest guru shareholder with a 2.14% stake. John Rogers (Trades, Portfolio), Pioneer, Baillie Gifford (Trades, Portfolio), Cohen, Jeremy Grantham (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Jones and Ainslie also own the stock.
Norwegian Cruise Line Holdings
A total of seven gurus have a position in Norwegian Cruise Line Holdings (NCLH, Financial), carrying a combined portfolio weight of 0.83%.
The cruise line operator, which is headquartered in Miami, Florida, has a market cap of $9.60 billion; its shares were trading around $25.95 on Thursday with a price-book ratio of 2.2 and a price-sales ratio of 189.43.
The GF Value Line suggests the stock is currently significantly overvalued.
Norwegian’s financial strength was rated 3 out of 10 by GuruFocus. Having issued approximately $5.9 billion in new long-term debt over the past several years, the company has weak interest coverage. The Altman Z-Score of -0.01 also warns of potential bankruptcy risk as the company has recorded losses in operating income.
The company’s profitability scored a 5 out of 10 rating on the back of negative margins and returns that underperform a majority of industry peers. Norwegian also has a low Piotroski F-Score of 2. Despite seeing declines in revenue per share in recent years, the company still has a one-star predictability rank.
Of the gurus invested in Norwegian Cruise Line, PRIMECAP has the largest stake with 0.73% of outstanding shares. Other top guru shareholders are Rogers, Pioneer, Jones, Richard Snow (Trades, Portfolio), Grantham and Ainslie.
TripAdvisor
With a combined portfolio weight of 1.51%, five gurus are invested in TripAdvisor (TRIP, Financial).
The Needham, Massachusetts-based company, which operates a platform to find, compare and book flights, hotels and cruises, has a $5.3 billion market cap; its shares were trading around $38.68 on Thursday with a price-book ratio of 6.75 and a price-sales ratio of 11.63.
According to the GF Value Line, the stock appears to be significantly overvalued currently.
GuruFocus rated TripAdvisor’s financial strength 4 out of 10. In addition to debt ratios that are underperforming its industry as well as versus its own history, the Altman Z-Score of 2.29 indicates the company is under some pressure.
The company’s profitability scored a 6 out of 10 rating on the back of negative margins and returns that underperform a majority of competitors. TripAdvisor also has a weak Piotroski F-Score of 2 and the one-star predictability rank is on watch as a result of revenue per share declining over the past several years.
With a 3.64% stake, Ron Baron (Trades, Portfolio) is TripAdvisor’s largest guru shareholder. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Cohen, the FPA Capital Fund (Trades, Portfolio), Pioneer, Jones and Grantham also have positions in the stock.
Other travel companies that are popular currently are Carnival Corp. (CCL, Financial), which is held by five gurus, and Travel+Leisure Co. (TNL, Financial) with four guru shareholders.
