This has been a wild year for the financial markets and there have been some big losers and even bigger winners with regards to investments. I was watching a podcast last week with David A Walsh Bronxville creator and a keen investor, and he was talking in particular about the travel and leisure industry. As an investor myself I have to admit that I really stayed away from buying in that sector because as soon as lockdown hit the whole thing went upside down.
Now that people are slowly traveling again, and hotel rooms are slightly filling up, the question on everyone’s lips is whether or not this sector will be a smart one to invest in, let’s take a look.
Reasons to Invest
The reasons to invest in these companies or hotel groups is that their share prices have absolutely tanked in the last 6 months. Big hitters like Hilton for example, not to mention the airlines, have not seen their share price fall as much for a very long time. Now many of those prices have rallied so they are not on the ground as they were some months ago, with this being said they are certainly way lower than what you would expect their valuation to be. This of course presents a great opportunity because the widely held belief is that these hotel groups and airlines will eventually bounce back, as the world becomes a little more normal.
Reasons to Avoid Investing
As much as we all believe that the travel and tourism industry will get back to where it once was, and let’s be honest, this is a very real possibility, there are no guarantees in the businesses. The sector may get back to its best, but there could easily be a number of companies within that which no longer exist by the time that it happens. So many within this sector are on borrowed time and if we take airlines as a perfect example, some are even having to be bailed out by governments such as Avianca. When hotel rooms sit empty or planes don’t fly, they still cost money and they are not making money, this is a huge concern for so many within this particular industry.
Small Slice of the Pie
The advice which most are giving, advice which I happen to agree with, is that you should look to take a small slice of your capital and have a punt on this industry. Make sure that you opt for robust investments like hotel groups which have the financial resources to wait this out. Don’t go big on your investments, keep this to a small fraction of your overall portfolio. If things do come back as before then you can cash in big, if they fail to, at least you have limited your exposure.
What do you make of this investment option? Is it something which you would look to take on?
