Three Top Travel Stocks

 
Three Top Travel Stocks

Stock Market Analysis Video

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I’ve mentioned here before my deep love of travel, so it’s no surprise that I’ve got big plans for my honeymoon, happening later this year. My fiancé and I discussed many possibilities: Australia (possibly too far), Costa Rica (not the right time of year), Hawaii (might do that as a vacation with our families at some point), and the list goes on.

We finally decided we’d like to go to Europe, as we both love it and have barely scratched the surface of what’s to see there. When we finally narrowed down which country we’d like to go to, we settled on France. What could be better than good wine, good food and good company?

All this thinking about travel has, naturally, got me thinking about travel stocks. So I scoured the Cabot newsletters to see which ones have been popping up lately and found a few interesting ones recommended by Editor Michael Cintolo in Cabot Top Ten Weekly.

First up is Royal Caribbean (RCL), which Mike recently featured …

“Royal Caribbean first popped up in Cabot Top Ten Weekly last October, then in November. And now this cruise company, whose brands include Royal Caribbean International, Celebrity Cruises, Pullmantur Cruises, Azamara Club Cruises and CDF Croisieres de France, is back again as investors continue to like the story of a recovering global economy and an aging population that's favorably disposed toward onboard vacations. A little over half (54%) of Royal Caribbean's 2009 revenues were from U.S. ticket sales, and the company gets nearly 30% of revenue from onboard sales and services. An aggressive program of cost controls yielded a strong 53% jump in earnings on just a 17% gain in revenues in Q3, and Q4 results, which are scheduled for 10:00 am Eastern on this Thursday (January 27) are widely expected to beat analysts' estimates. Some of that expectation is already priced in, but a good result should still boost the stock.”

“RCL has gone through some significant corrections during its rise from 5 in early 2009 to near 50 in recent trading, but the tendency is clearly up. After popping up to its recent high on January 15, RCL has corrected to its rising 25-day moving average just above 47. It's likely that the stock will trade sideways until earnings are out. A small buy, with a tight stop at the 50-day moving average (now at 44.5) should do well.”

As Mike mentioned, Royal Caribbean reported earnings last night. The company beat Wall Street forecasts for the most recent quarter with Q4 profits of $42.7 million, or 20 cents per share, handily beating views of $26.9 million, or 13 cents per share, and well above last year’s $3.4 million, or 2 cents per share. Revenue rose 10% over last year to $1.6 billion. But Royal Caribbean’s outlook disappointed investors, sending the stock lower. So watch this one closely before jumping in.

And now for an old favorite, Priceline.com (PCLN), which has been featured in Cabot Wealth Advisory many times. This is what Mike wrote about Princeline in Cabot Top Ten Weekly in mid-November …

“Priceline.com remains one of the handful of liquid (i.e., very well-traded and institutionally owned) leaders of this bull move, and the reason is obvious—business is very good and continually outpaces even the most bullish forecasts. Last week, the company continued that trend by putting up another round of outstanding numbers, and the under-the-hood metrics were also impressive—gross travel bookings leaped 47% from the prior year, international revenues surged 67%, hotel bookings leaped 54% and the firm's newly acquired rental car unit sales nearly doubled! Domestically, growth is slower but steady, and management has been pushing all the right buttons in positioning its brand around the world. Analysts significantly hiked their outlooks following the earnings report (next year's earnings estimate is now $17.53 per share, up from $15.45 one month ago), which would mark a healthy 33% hike from 2010. We like it.

“PCLN hasn't gotten many headlines and the stock isn't the hottest thing on the planet. Nevertheless, shares remain in a firm uptrend, and as you see on this weekly chart, have barely had any hiccups since the summer. Last week's earnings gap was solid—shares rose 8% on nearly triple average volume—but not so powerful that we think it'll be all up from here for PCLN. A pullback of a few percent is possible, and would be buyable if it comes.”

After the write-up, PCLN meandered for nearly two months before taking off on big volume at the beginning of January. Earnings are out in mid-February, so watch closely to see how the stock reacts.

Last, but certainly not least is Winnebago (WGO), which recently appeared in Cabot Top Ten Weekly …

“Americans love the open road and as the leading maker of motor homes with over 18% market share, Winnebago is synonymous with seeing the sites in style. Motor homes aren't cheap, rivaling the cost of real homes in some cases, so the recession hurt 2009 results as consumers hesitated on big purchases. But motor homes are now seeing resurgent interest, so the rebound of sales in 2010 to $450 million from $212 million in 2009 was no fluke. That also means dealers have worked through the inventory they sat on and now need new homes to showcase on their lots. Inventory was still near historic lows last year at 2,044 homes, well below the 3,500-plus that was typical during the past decade. Expectations are also rising because Baby Boomers are projected to be significant motor home buyers as they enter retirement. On top of that, existing owners tend to trade in or up to a new motor home every five to seven years, meaning buyers from the industry's sales peak of 2004 are now kicking the tires on possible upgrades.”

“Buyers piled into WGO in mid-December as the company announced profit that topped Wall Street expectations and gave indications dealers were optimistic enough to start stocking more motor homes on their lots. The surge, from 10 to 15, broke shares out of trading range without drawing in much selling. The next level to break is 17; shares appear to be consolidating for a run there soon. Long-term, shares tend to be more volatile, trading in response to broader economic conditions that imply consumer discretionary spending may be rising or slowing.”

Mike recommends buying WGO between 14 and 16 to minimize risk, so keep that in mind if you take a position.

For more on RCL, PCLN, WGO and other leading stocks, check out Cabot Top Ten Weekly, where Mike Cintolo brings you the market’s hottest stocks each and every week.

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In this week’s Stock Market Analysis Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says that it's been a good week in the market, as the S&P 500 remains in an uptrend. Where it starts to get interesting, he says, is when you look at some of the individual stocks. Stocks discussed include F5 Networks (FFIV), Acme Packet (APKT), AmBev (ABV), Netflix (NFLX), Under Armour (UA) and Intuitive Surgical (ISRG). Click to watch.

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In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.

Cabot Wealth Advisory 1/24/11 – Dispelling a Popular Myth About Options

On Monday, Rick Pendergraft explained that many of the 75% of options that expire worthless are meant to do exactly that. Rick provided two examples of how this works. Rick also recommended a covered call on an exchange-traded fund that he thinks investors could profit from. Featured investment: Utilities Select Sector SPDR (XLU).

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Cabot Wealth Advisory 1/15/11 – How to Find the Next Apple … Ahead of Time

On Tuesday, Andy Obermueller of StreetAuthority discussed what he calls game-changing stocks and four strategies he uses to invest in these hot ideas.

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Cabot Wealth Advisory 1/27/11 – Why You Should Ignore Predictions

On Thursday, Paul Goodwin discussed all the talk about the coming correction, which has yet to appear, and why you shouldn’t take much stock in predictions about the market (or anything else). Paul discussed how New England’s snowy winter can teach us about taking conditions into account when we invest. And he also recommended a stock that’s been called “the Amazon of China.”  Featured stock: E-Commerce China Dangdang (DANG).

Until next time,

Elyse Andrews
Editor of Cabot Wealth Advisory

P.S. You read our newsletters, now show Cabot some love on Facebook. Click here to “like” our page!

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