Mapped: The State of Small Business Recovery in America

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    Mapped: The State of Small Business Recovery in America

    The travel and entertainment industries have had a volatile ride over the last year.

    During the initial stages of the pandemic, when panic and uncertainty ran rife, BEACH stocks–booking, entertainment, airlines, cruises, and hotels—were left scrambling. Collectively, $332 billion in market cap washed away.

    Now, it appears the tide might be turning for these companies, buoyed by vaccine breakthroughs and glimmers of hope for a return to normalcy.

    This infographic looks at the growth in market cap value across BEACH stocks one year from when the WHO officially declared COVID-19 a pandemic.

    Washing Back to Shore?

    BEACH stocks have gained a collective $376 billion in market cap in the year since the pandemic was declared, with about half the companies trading at their respective all-time highs.

    In fact, about 70% of BEACH stocks have actually outperformed the S&P 500, which returned 43.7% during the same period.

    Company Ticker Category Market Cap: 03/11/20 ($B) Market Cap: 03/11/21 ($B) Change
    American Airlines AAL Airlines 7.2 14.2 96%
    Southwest Airlines LUV Airlines 23.5 34.4 46%
    Alaska Air Group ALK Airlines 5.7 8.1 42%
    United Airlines UAL Airlines 13.0 17.2 33%
    Air Canada AC Airlines 5.9 7.9 33%
    Delta Air Lines DAL Airlines 29.1 30.9 6%
    Expedia Group EXPE Booking 12.0 24.6 105%
    Allegiant Travel ALGT Booking 2.0 4.1 98%
    Booking Holdings BKNG Booking 64.0 96.0 51%
    Caesars Entertainment CZR Casino & Hotel 2.2 20.8 824%
    Norwegian Cruise Lines NCLH Cruise & Casino 4.3 10.9 151%
    Royal Caribbean Cruises RCL Cruise & Casino 10.8 22.4 108%
    Carnival CCL Cruise & Casino 16.4 31.8 93%
    Penn National Gaming PENN Entertainment & Live Events 2.6 20.4 661%
    Six Flags SIX Entertainment & Live Events 1.7 4.1 142%
    Live Nation LYV Entertainment & Live Events 10.8 19.3 79%
    The Walt Disney Co DIS Entertainment & Live Events 201.2 357.1 77%
    Cedar Fair FUN Entertainment & Live Events 1.8 2.8 57%
    Hilton HLT Hotels 25.0 34.6 38%
    Marriott International MAR Hotels 35.6 48.2 35%
    Choice Hotels International CHH Hotels 4.5 5.9 30%
    Hyatt Hotels H Hotels 6.7 8.7 29%
    Marriott Vacations Worldwide VAC Hotels & Resorts 3.8 7.7 103%
    Vail Resorts MTN Hotels & Resorts 7.1 13.4 88%
    Park Hotels & Resorts PK Hotels & Resorts 3.4 5.3 58%
    Wyndham Hotels & Resorts WH Hotels & Resorts 4.2 6.4 51%
    MGM Resorts International MGM Resorts & Casino 10.2 19.3 89%
    Wynn Resorts WYNN Resorts & Casino 9.7 15.9 64%
    Las Vegas Sands LVS Resorts & Casino 40.7 48.2 18%

    BEACH Stocks Leaders and Laggards

    When dissecting this basket of stocks by industry, it’s clear that much of the recovery story is lopsided. One reason for this, despite the pandemic, is that there are more granular, idiosyncratic trends occurring within these sectors.

    Let’s look at what’s propelling the leaders, and dragging down the laggards:

    Leading: Online Betting

    There’s reason to be bullish on gambling stocks. Since late 2018, some 20 states have legalized sports betting, with more expecting to follow. Relative to other areas, the pandemic has been kind to gambling stocks. Many of those with an online presence have witnessed a spike in traffic, as more people continue to flock towards online betting.

    Within the BEACH stocks basket, Penn National Gaming and Caesars Entertainment are clear outliers, having grown an epic 661% and 823% respectively. In addition, the broader industry (measured by the BETZ ETF) has nearly doubled the performance of the S&P 500 since its inception.

    Laggard: Airlines

    The return to normalcy will be much more delayed for airlines. Global RPKs, an industry metric, are not expected to reach pre-pandemic levels until 2024.

    Actions of insiders also seem to match this negative sentiment. Warren Buffett, once a staunch supporter of airlines, decided to call it quits during the pandemic—dumping his entire position.

    Airline COVID RPKs

    U.S. airline executives have collectively been selling their stakes much more aggressively than in the last few years. To add insult to injury, there’s significant shorting of airline stocks as well. At a short interest of 11.6%, American Airlines is most heavily shorted BEACH stock.

    Laggard: Hotels

    In a year where social interactions and gatherings have largely disappeared, so too has much of the business activity for hotels. For instance, Hilton sales suffered a 58% decline year-over-year.

    But even without the pandemic, the hotel industry had their work cut out for them, through a growing and formidable competitor in Airbnb. Airbnb can scale its network beyond what any hotel can. This is evident in its room count, which is greater than the largest hotels combined.

    Airbnb room count vs hotels

    More Bumps On The Road Ahead?

    The investing landscape today looks to be disconnected from reality, in part because of the forward-looking nature of markets. Even though things are dire today, there’s a belief that light exists at the end of the tunnel.

    But the path to recovery isn’t quite so linear. When the dust settles, it’ll become more apparent which industries will “return to normal” and which have set out permanently on a new trajectory.

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    Published at Wed, 28 Apr 2021 19:24:50 +0000

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