My 1 pick for a travel stock I’d buy now

Tom Rodgers
·3-min read
Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine

Sometimes I tell people I’m thinking of the travel stocks to buy now and they look at me as if I need my head examined. Have I not heard that there’s a pandemic on? Airlines are reporting passenger numbers 80% to 90% down? Well yes, that’s true.

But to me that means that travel stocks are super cheap right now. And so I’ve investigated the FTSE 100 and FTSE 250 shares I think could gain the most in 2021.

When we can all fly safely again, can you imagine the demand? How many of us, freshly protected from Covid, will hanker after pastures new? The UK aims to have given every adult in the country a vaccine by September 2021, after all.

Travel stocks to buy now?

As travel stocks find an audience, investors tend to look first to the airline businesses as they have the highest profile. Indeed, British Airways owner International Consolidated Airlines and recently demoted FTSE 250 entrant easyJet are now in the UK’s top 10 most traded shares.

But I wouldn’t buy either. Even now at reduced levels, with Covid dragging their prices down, I don’t see either of these as a particular bargain.

I’m not just looking for ‘cheap’, I want value too. So I’d also swerve the likes of Carnival for its incredibly high costs and massive debt pile. I think those two things will hang over the cruise operator for years to come.

Have vaccine, will travel (stocks)

Online-only travel agent On the Beach (LSE: OTB) might have sneaked into my list of travel stocks to buy now because of its low-cost model. As my Motley Fool colleague Paul Summers explains, OTB is “asset light”. It has no planes to maintain, nor high fixed costs to deal with.

But a £38.8m loss this year does damage its net cash position. And I don’t like the fact that CEO Simon Cooper sold £14m of shares in December. That doesn’t give me a lot of confidence.

Instead, the only share I’d consider for travel stocks to buy now is Wizz Air (LSE:WIZZ).

Bag a bargain

The Hungary-based FTSE 250-listed budget carrier was on my radar as a medium-term buy and hold before the annus horribilis of 2020.

Wizz Air’s share price has actually gained 25% in the last three months, but still sits at a low P/E ratio of 12.8. So in a list of the best travel stocks to buy now? It looks pretty cheap to me.

The fact that Norwegian Air has departed the long-haul, low-cost skies means it has one less rival to deal with. And this month it announced six new routes, to Turkey, Bulgaria, Spain and Greece from Doncaster, Gatwick and Luton.

I’m a big fan of the way management kept strong lines of communication open last year. And how it continued to seek growth, launching nine new routes from Belgrade, even while the entire future of the industry seemed in doubt. That’s confidence. That’s how to get new investors interested.

And just compare the year-end results from 2019 to 2020. Wizz more than doubled its profits from £128m to £294m. That’s the kind of slimline operation I want to buy at bargain prices.

I’d snap up a few Wizz Air shares for my ISA and hold into 2022 and beyond.

The post My 1 pick for a travel stock I’d buy now appeared first on The Motley Fool UK.

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TomRodgers has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021