Travel stocks — A risky play during the COVID-19 pandemic

As almost everyone knows, travel has been halted by the COVID-19 pandemic. As a result of this, nearly all stocks related to travel have taken a hit to their stock price.

This change in market value presents an opportunity for many people that would have been scared away by the price tag of those stocks. After all, the ideal investment is when you buy at a low point, and sell when its value is at its highest.

When evaluating an opportunity like this, you must look at the risks first. The first risk is that you do not know when or if the travel industry will recover. The other risk is that whichever travel company you choose, could go out of business, and therefore losing all of the money you invested buying shares of the company.

Now that we know the risks, let’s evaluate them to understand how each risk will affect our investment.

The travel industry is something that has evolved in the past century and will continue to evolve year over year. The industry will adapt to the challenges that COVID-19 presents. Some airlines may collapse, but, the larger ones will survive in some capacity. So, what does this mean for an investor? It means you back the few that you believe will recover from this pandemic. To me, it is the larger travel companies that will survive.

I have personally invested in Air Canada (Symbol: AC.TO), as their current market valuation is about 20-30% of it’s average over the past few years. To me, that shows a high level of growth potential, as well as finding an undervalued stock for the long-term.

As with any investment in the stock market, you assume the risk that you will lose money. I am in no way a financial advisor, just someone who has thought about this topic, and believes that there is a chance that this stock will rebound strongly!

During this pandemic, there are lots of opportunities to buy bluechip stocks at bargain prices. Go out there and find those deals!

1 Comment

  1. I use fantasy portfolios a lot to experience different ways of looking into investments and to help me find what works. I bought some easyJet shares in a fantasy portfolio recently and they’ve gone up £700 more than the ones I actually bought in a mutual fund… Lesson learnt haha. While it’s a bit disappointing, I’m telling myself that slow and steady is the way to go. I hope your air Canada decision pays off!

    Like

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