Should You Invest in Travel & Leisure Stocks?

The FTSE 100 index began the year at 6,571.88 and is currently trading around 7,018.05 (May 24, 2021). That represents an increase of 446.17, or 6.8% for the year-to-date. Given the geopolitical situation, the performance is acceptable.

The constituent components of the FTSE 100 index – 101 of them, have a net market capitalisation of $1.516 trillion, with a dividend yield of 4.70%. The largest company on the FTSE 100 index has a market cap of £109, 418M, and the smallest has a market cap of £1867M.

Source: London Stock Exchange January – May 2021

The performance of the travel and leisure stocks of the UK has been mixed, with several companies generating sizeable year-to-date gains, and others racking up huge losses. Among the top-performing stocks are the following options:

  • Comptoir Group – market capitalisation of £12.88 million, with year-to-date gains of 296.23% – restaurants across the UK.
  • Webis Holdings – market capitalisation of £16.32 million, with year-to-date gains of 144.12% – operates in the gaming and technology sector with deposit wagering services.
  • Escape Hunt – market capitalisation of £32.35 million, with year-to-date gains of 139.34%, with live escape-the-room experiences across the UK and abroad.
  • Tasty plc – market capitalisation of £10.05 million, with year-to-date gains of 126.03%, operates restaurant chains across the UK, with 56+ in restaurants nationally.
  • Brighton Pier – market capitalisation of £22 million, with year-to-date gains of 90.32%, leisure and entertainment assets across the UK.
  • Gaming realms – market capitalisation of £115.19 million, with year-to-date gains of 83.03%, publishes, develops, and licenses mobile gaming content across the UK, US, Canada, Sweden, and elsewhere.

The travel and leisure stocks listed above represent a small sampling of the top-performing shares in the UK. There are many online casino and online bingo brands generating sizeable returns, many with healthy market caps. Fuelling robust growth in the travel and leisure industry, particularly the online gaming sector, are easy-to-use payment processing options for players.

By facilitating ready access to deposit and withdrawal methods, these companies are driving player engagement and revenues. Popular options include PayPal-friendly casino brands since these don’t require players to input sensitive banking account information. This serves players well, which in turn makes it an attractive option for investment purposes.

The Performance of the Tour Operators industry

Of all the industries in the UK, tour operators don’t feature in the top 10. In fact, the biggest industries include the following:

  • Supermarkets
  • Pension Funding
  • Construction Contractors
  • Banks
  • New Car and Light Motor Vehicle Dealers
  • Hospitals
  • General Insurance
  • Management Consultants
  • Pharmaceutical Wholesaling
  • Computer Consultants

As of March 2021, the leading ATOL-licensed tour operators across the UK by passenger numbers includes the following operators, many of which trade on the FTSE 350 index.

  • TUI – 3737.8K
  • Jet2Holidays – 3479.2K
  • On The Beach – 1223.6K
  • We Love Holidays – 1085.8K
  • British Airways Holidays – 598.5K
  • easyJet holidays – 547.4K
  • Bravo Next – 433.2K
  • Easyjet airline company – 341.6K
  • Expedia – 317K
  • Southall Travel – 291.5K

* Source: Statista: Leading ATOL-licensed tour operators in the United Kingdom (UK) as of March 2021, ranked by number of passengers licensed.

Despite the uptick among certain operators, travel and leisure stocks are undergoing a consolidation phase right now. The stocks are ripe for the picking, but various externalities are affecting their viability as short-term investment options. It’s more of a buy and hold situation at the moment than a buy and sell. Naturally, travel and leisure stocks are expected to grow as economic conditions improve, and more disposable income filters through the economy. Until then, analysts consider these a tepid investment with upside potential.

Companies like Carnival, easyJet, Playtech, TUI, and others trade on the FTSE 350 index, under the travel & leisure section (FTNMX405010).

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