The ground is splitting out from under us. On one side, you have investors claiming the bullish recovery is on. While other investors believe the bears are still out for blood. The market divide might be making it challenging for new investors to make sense of the market.
Most new investors are looking to snap up quality blue-chips in the banking or travel industry. However, with travel stocks acting like a roller coaster, many new investors are wondering when they should jump on?
The statistics below showcase the crazy ride so far.
The realistic expectation for scientists to develop a viable COVID-19 vaccine is 12-18 months. Vaccine projections, combined with global lockdowns is causing the travel industry to come to a screeching halt.
Investors are buying cheap airline stocks only to sell once the travel industry goes back to ‘business as usual.’ Thus, positive COVID-19 treatment results will see the travel industry return in a short time frame.
Why did Sydney Airport act like a bull last week?
On Friday, the travel industry, especially SYD, surged after news got out that Gilead could have a viable COVID-19 treatment (Remdesivir’s). If you would like to learn more about Gilead’s groundbreaking results click here.
Investors interpreted Gilead’s results to mean the virus could dissipate within a shorter timeframe. Meaning travel stocks would return to normal sooner. Thus, triggering a buying frenzy of SYD on Friday.
Moreover, SYD has access to approximately $2 billion in funding to cover its $1.3 billion in expiring debt over the next 12 months. Therefore, it makes sense that investors flocked to SYD, one of the most attractive airlines, on the back of good news.
Is it too late to snap up airline shares ?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Short answer: No
Airlines are running flights with only 5% capacity (essential travel). Most airlines are not expecting the level of demand in FY19 to return until at least FY21/22. Within this time frame, the likelihood of setbacks is high. Meaning, investors have enough time to invest on the back of a decline and not on the end of a bullish run like last week.
Also, many investors will look to pump and dump travel stocks, such as Qantas and Sydney Airport. Because the future remains uncertain. Thus, providing window opportunities to get in on the back of a sell-off.
Friday’s market reaction taught us that airline stocks surge whenever there is positive COVID-19 development. Therefore, If I were investing in the travel industry, I would make sure I was up to date on the recent COVID-19 treatment developments, especially from Gilead.
Here is our free, uncomplicated, and extensive ASX portfolio
Want access to free, uncomplicated, and smart COVID-19 Strategies then click below?
The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin, Senior Manager of YIG.