Prospects of a vaccine have sent Australian travel stocks soaring by up to 50% over the past month and a leading fund manager believes they have plenty more headroom despite recent dismal financial results and dire short-term prospects.
Corporate Travel Management (CTD) and Webjet (WEB) led the pack with share price increases of 49 per cent and and 41 per cent respectively between August 3 and September 3, while Flight Centre (FLT) stock rose an impressive 31 per cent over the same period.
Helloworld (HLO) was up 27 per cent, Qantas (QAN) shares increased by 24 per cent while camper van manufacturing and rental company Apollo Travel and Lesiure (ATL) surged 50 per cent.
Skydiving and travel company Experience Co shares led the pack with a 50 per cent increase.
These increases are far in excess of the overall market. The value of shares listed on the Australian Stock Exchange (ASX) rose just 3 per cent during August.
Macquarie Securities says these spectacular returns “reflect investors’ desire to own vaccine beneficiaries”, which also include leisure (aka gambling) stocks such as Star Entertainment Group (SGR), up 21 per cent.
According to a report in the Australian Financial Review, fund manager Mark Landau, co-founder of L1 Capital, says sectors such as travel which have been hammered by COVID-19 are currently under valued.
“We think that a lot of the COVID hit stocks are still not reflecting any improvement in the likelihood of a vaccine and we think that that represents by far the best risk-reward that we can see in the market at the moment,” Mr Landau told the Future Generation investor update on Wednesday.
“So whether it’s travel stocks or casinos or shopping centres or oil stocks –they all are clear COVID losers,” he said.
“And many of them are trading 50 per cent lower than where they were trading back in January, so the nice thing about maths is that means 100 per cent upside.”
Landau says he is optimistic a safe and effective vaccine will be developed but did not give a time frame.
Until then international borders will remain closed.