Investors set out on a wild ride in 2020. Stocks were initially hit hard by the COVID-19 pandemic, but then rose as the year progressed. Equities seem to have defied gravity, or at least they have weathered the great economic hardships the pandemic was creating.
The new year comes with the promise of a vaccine, which we hope will allow life to return to normal and bring about an economic recovery in time. Three shareholders believe Motley Fool AerCap Holdings (New York Stock Exchange: AER)And the Ford Motor (New York Stock Exchange: F)And and Carnival (New York Stock Exchange: CCL) (NYSE: CUK) Stocks worth buying for the sake of economic recovery.
Image source: Getty Images.
The best way to invest in a travel recovery
Lou Whitman (Aircap): Airlines Heavily hit during the pandemic, shares that depend on airlines have plummeted for revenue with airlines. AerCap, which has been involved in buying and leasing aircraft back to airlines, was among the victims. The company’s shares lost nearly 75% of their value during the early days of the pandemic as investors feared that the highly leveraged business would be forced into bankruptcy by airlines that could not pay their bills.
These investors underestimated the power of AerCap’s balance sheet. The company had to incur more than $ 1 billion in fees to reduce the value of its aircraft portfolio and defer more than $ 350 million in rental payments to affected customers. But AerCap still had more than $ 11 billion in total liquidity as of the end of the September quarter, and $ 25 billion in unencumbered assets to borrow if things went wrong.
With the arrival of the vaccine, things won’t get worse from here. Airlines will need years to rebuild their bruised budgets, but with each passing month we should see a slight increase in travel demand as the vaccine becomes more prevalent. Even if that isn’t enough to ensure airlines are profitable in 2021, it should be enough to allow them to pay their bills, which means AerCap will see business return to normal even before travel returns to pre-pandemic levels.
AER vs Markets Data by YCharts
If anything, it is likely that airlines that took billions of dollars in debt to survive the pandemic will be more focused post-crisis on leasing aircraft rather than buying them and putting additional debt on their balance sheets. Nevertheless, AerCap shares are still lagging behind broader markets, and as of this writing actually follows American Global Aircraft Airline Trading Fund (ETF) since the beginning of the year.
The market has this bug. If you think travel demand will eventually return – and I do – AerCap should be surging in the coming quarters.
Why Ford May Be the Car Growth Story of Next Year
John Rosver (Ford Motor): I know the idea of ​​investing in Ford might sound a bit ridiculous to growth-conscious investors who are still standing by. Tesla Gains over the past year. But bear with me here because there are two good reasons why Ford might surprise the market in 2021.
First, with a large Car manufacturersStock prices tend to follow sales – and auto sales tend to rebound early in economic recoveries. The recovery after COVID will not be exactly the same as the normal post-recession recovery, but the recovery in consumer and business confidence should trigger a jump in car, truck and SUV sales in 2021.
Tesla who? Ford’s electric heating rod, the long-awaited Mustang Mach-E, is heading to dealers just in time for a post-COVID recovery. Image source: Ford Motor Company.
Second, Ford’s stock outperformed most other automakers during the the last The recovery (2010-2011) because Blue Oval had good, fresh products coming to dealers’ showrooms as soon as buyers returned – and while competitors were scrambling to catch up. That might be true this time as well.
Ford The all-new 2021 F-150 pickup, The all-new Bronco Sport SUV, and (speaking of Tesla), the new electric Mach-E Mustang is just starting to ship to dealerships. Timing couldn’t be better: The F-150 is a Ford bestseller, and the other two are the kind of vehicles that bring curious consumers into its showrooms.
There’s more in 2021, including Lots of expected new Bronco, An updated version of the big Ford Expedition SUV, And a brand new pickup truck you might call the Maverick. A little further out, we’re expecting new electric versions of the F-150 and the massive commercial Transit truck, as well as a new (non-electric) Mustang.
Ford shares have tumbled over the past few years because its product portfolio has been aging. It didn’t help that Ford cut its profits early in the pandemic, when the outlook looked bleak. But now, Ford’s product pipeline looks solid, just as the end of the pandemic is nearing. If all goes well in the next two quarters, dividends can be redistributed sometime in the next year. All this bodes well for Ford stock in 2021.
Buy cruise lines before returning to normal
Rich Smith (Carnival): Coronavirus has destroyed the US cruise industry, which has spent 75% of the year confined to a port underneath.No sailOrders issued by the Centers for Disease Control (CDC). Until the arrival of a “framework” forCop sailing“At the end of October it did not end the agony of the industry because, so far, no one had left the United States
As 2020 draws to a close, shares of Carnival – the largest company in the industry – are still 53% lower than they were a year ago. But all of this could change in 2021.
Indeed, here and there, cruise lines are preparing to operate “simulated cruises” without passengers to obtain CDC certificates that will allow them to return to work. In anticipation, cruise lines are starting to schedule at least short-duration cruises, such as 18 flights from Canada to Alaska That Carnival is planning the beginning of May 2021.
It is no coincidence that May (or June or July) is the months often referred to as the time when most Americans who wish to get vaccinated against the Coronavirus, which reduces the health risks of sailing. If all goes well, by the second half of the year things should be back to normal for Carnival.
What will “return to normal” look like? Suppose in 2022, for example, Carnival was able to do something close to the level of business it enjoyed in 2019. That means $ 21 billion or so in revenue and $ 3 billion in profit. At a recent market cap of $ 24 billion, Carnival will be valued at eight times the profits – roughly Half Average futures per share price-to-earnings ratio for the past 10 years, according to data from S&P Global Market Intelligence.
In other words, I see almost carnival arrows Double In price next year as investors begin to look at what they might earn in 2022. I think that might make Carnival Corporation stock Big winner In 2021.
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