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A Light at the End of the Runway

Look for business travel to pick up in a big way in 2022 as the pandemic winds down, which is why American Airlines is a stock to consider.
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Last Friday the U.S. released its monthly jobs report for October. Not only did the report of 531,000 new jobs beat analysts' expectations by about 80,000, but revisions to the two previous months uncovered hidden strength. September's previous result of 194,000 new jobs was revised upward to 312,000, and August's figure, originally reported as 235,000 new jobs, was adjusted higher to 483,000.

One of the strongest categories for job creation over the past three months has been professional and business services. This sector alone has grown by 315,000 jobs over that time. 

Strength in this sector implies the hiring of management personnel. Adding bench strength to management now suggests confidence going forward. It's not hard to envision a big uptick in business travel next year. 

Back in September 2020, I picked Choice Hotels International (CHH) as a top reopening pick.  Since then, the stock has shot from $99 to $151, a gain of 50%. Admittedly, I was aiming at the low end of the price/quality spectrum due to a choppy and uncertain reopening from the COVID-19 pandemic. 

Now, over a year later, the picture for reopening is brighter than ever, thanks to medicinal advances in the fight against COVID-19. Just this week, studies showed Regeneron's (REGN) antibody cocktail reduced the risk of COVID infection by 82%. Other new treatments are on the way. 

Perhaps it's time to take a profit on our low-end hotel chain and roll the proceeds into something that has more upside going forward. I'm looking at American Airlines Group (AAL) . 

American Airlines closed at a four-month high on Monday. In doing so, the stock managed to climb above a major resistance barrier at $22.20 (black dotted line). That level acted as resistance on several occasions in June, September and October (black arrows). Over the past week, the stock has been climbing on above-average volume (shaded yellow).

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Some investors are avoiding the airline sector due to recent issues with mass cancellations and vaccine mandates. My point is that with new and effective therapeutics on the way we are closing in on the end of this pandemic. If that's the case, many of the hot-button issues associated with the pandemic soon will fall by the wayside. 

This year was supposed to be the year the pandemic ended, but it wasn't. In retrospect, 2021 will be remembered not as a return to normality, but as a bridge.

The advantages of doing business in person became very clear over the past 18 months. Consequently, I expect a big uptick in business travel in 2022, which should benefit the airline sector in the coming year.

At the time of publication, Ponsi was long AAL.