It could be the summer of the road trip.
As lockdowns slowly lift under the threat of the coronavirus pandemic, two market pros are betting travel demand could pick up outside of airlines and hotels.
Strategic Wealth Partners President Mark Tepper told CNBC’s “Trading Nation” he’s been paying close attention to daily TSA passenger numbers.
“At the beginning of the year, we were seeing about 2.5 million people per day,” he said Wednesday. “At our worst in April we were all the way down to 100,000 a day. We’re climbing back up: We’re at about 500,000 a day, but that’s 80% below that normal run rate.”
Airlines have taken a big hit from the slowdown in air travel. The JETS airline ETF, whose holdings include United and Delta, remains 44% off 52-week highs.
Tepper expects consumers to avoid air travel through the summer. Instead, he is betting on a stock that could benefit from travel by road. One in particular he likes is auto parts supplier O’Reilly.
“The vehicles in the U.S., they’re old, and they just keep getting older, you need to fix them up because really nobody’s buying new cars,” he said. “Now people, they’re able to go out, they’re working from home, they have some time on their hands to work on repairs. So I do think O’Reilly is going to bounce back faster than a lot of people expect.”
JC O’Hara, chief market technician at MKM Partners, recommends that investors broaden their exposure across the travel industry rather than pin hopes on any individual stocks.
“The responsible thing to do is to spread your bets out. And one way you could do this is through the ETF world, and one of our favorite ETFs to play this theme is the travel tech ETF,” said O’Hara during the same segment.
The AWAY travel tech ETF holds stocks such as Uber, Booking and Trivago and is up 34% this quarter.
“This is a relatively new ETF. It was launched in February, so obviously it got slammed along with the entire market, the ETF was cut in half,” he said. “But we’re slowly starting to see trends and momentum pick up. Over the short term, it’s probably a little overbought here, so we’ll be patient. We would like to buy on a pullback, we believe $17 offers a great opportunity.”
There is one stock O’Hara sees riding higher alongside O’Reilly as consumers take to the roads this summer.
“Take a look at Winnebago, maker of RVs. At the March lows, it was under $20. Today it’s trading at $70. So you can really see the market is honing in on this theme of, ‘Hey, we’re not going to fly, consumers are going to get in their car and drive somewhere this summer’,” he said.
Winnebago is up 138% in the past three months.
Disclosure: Strategic Wealth Partners holds O’Reilly.
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