Traveling in the Wrong Direction
Many travel and leisure stocks are showing similarly ugly charts
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On Monday, the S&P 500 closed higher for the ninth consecutive session. The large-cap index now trades just 1% below its all-time high.
Despite this, plenty of stocks are far off their highs. For example:
Marriott International MAR is one of the world’s largest hospitality providers, boasting 8900 properties in 141 countries. The Bethesda, Maryland-based hotelier boasts annual revenues of over $24 billion.
United Airlines UAL, along with American Airlines AAL and Delta Airlines (DAL), is one of the “big three” U.S. passenger carriers. United offers 4500 daily flights to over 300 cities across five continents.
Carnival Corporation CCL is the world’s largest cruise provider. Carnival operates a fleet of over 100 ships across 9 different brands.
Six Flags Entertainment SIX is the second-largest U.S. amusement park operator, and the fourth-largest in the world.
All four travel and leisure-focused companies are among the leaders in their respective areas, and all four have similarly woeful charts. After viewing these charts, you may reconsider owning travel and leisure-related holdings in your portfolio.
After reporting earnings at the end of July, shares of Marriott fell off a cliff (point A). The stock fell below its 50-day (blue) and 200-day (red) moving averages to reach a six month low by August 5 (point B). Those key moving averages now appear ready to cross, a sign of negative momentum (point C).
While the stock has been climbing along with the market since its August 5 low, the volume on Marriott’s recent rally is well below the level of turnover that occurred during its selloff (shaded yellow). This is a sign that Marriott’s rally might soon end.
During a press conference following its recent earnings report, Marriott noted a weaker operating environment in China, and suggested that demand in the U.S. and Canada was softening.
Like Marriott, United Airlines provided disappointing forward guidance. United lowered its earnings projection to between $2.75 and $3.25 per share. Analysts were anticipating third quarter earnings at $3.38 per share.
United reached a six-month low on August 5. The stock trades below its key 50-day (blue) and 200-day (red) moving averages, which appear ready to cross (shaded yellow).
Shares of Carnival Corporation lost 27.5% over a nasty two-week stretch. The stock reached a three-month low on August 5, and is trading well below its key 50-day (blue) and 200-day (red) moving averages.
Despite a recent bounce, shares of Six Flags Entertainment have lost over 22% over the past month.
How can we interpret the above four charts, taken together?
Consumers are still suffering from the worst bout of inflation in over forty years. That alone could have a negative impact on all four stocks, and their respective sectors.
In addition, if economic growth is slowing, it would be reasonable to assume this would have a negative impact on hotels and airlines.
It’s also possible that pent-up demand for travel experiences in the wake of the Covid-19 pandemic has finally run its course.
We can speculate about the reasons why these stocks are seemingly falling in tandem, but it's more important to take precautionary measures. I'm closing all positions related to travel and leisure, effective immediately.
