After the shock of lockdowns, we’ve all been staying safe at home, and if we’re lucky, working remotely. This has ushered in a whole new reality to how we operate day to day. Technology is our savior. From software and cloud services to audio and video, we’re making the most out of recent advancements.
And in my Profitable Investing, I’ve been focusing subscribers’ attention on the large collection of companies in my model portfolios that are providing all of this tech. These companies have been winners during lockdowns — and I see them continuing to succeed as we move into reopening. Most of us will limit our “normal” lives until there is an effective vaccine program.
So much has changed. We’re cooking and eating more food at home. Household goods — like soap, cleaning products and toilet paper — are in high demand. Companies that focus on packaged food have joined tech stocks as winners amid the pandemic.
The confluence of both is Amazon (NASDAQ:AMZN). Amazon has the technology — including its Amazon Web Services (AWS) for the cloud. And of course, it has food and essential goods ready to be dropped on your doorstep.
But there is more to life than just holing up and staying at home. We will want — and even need — to get out before the vaccine is fully ready. We want and need to be able to enjoy the outdoors. Most of us haven’t had a vacation in months, and we really want one right about now. Are there any travel stocks worth buying now?
Do Consumers Have the Money to Travel?
Now, the major issue is whether U.S. households even have the ability to spend and travel. Yes, the unemployment figures have been horrible. But there are still millions of households that remain employed. Thankfully, this gives the U.S. economy a strong base.
U.S. households also are stocking away a lot more cash in savings. Why? Needs and wants have changed in a swift and dramatic fashion.
U.S. Net Savings
Savings — as tracked by the U.S. Bureau of Economic Analysis — have soared. They have hit a current estimated level of $1.6 trillion. And those savings have plunged into commercial banks, where deposits are soaring to a current level of $15 trillion. That’s up 20.4% year-over-year.
U.S. Commercial Bank Deposits
This means that the majority of U.S. households have jobs, more income and more savings. They’re stocking cash away to prepare for more shutdowns, and for the new normal.
Plus, data from credit card companies is also providing good news. JPMorgan Chase (NYSE:JPM) just announced that charges for essential goods and services were up 20%. However, overall spending from March 1 to April 11 was down 40%.
This shows that consumers are capable of spending, and if you want further proof, look to May’s retail sales report. Together, the data fits the narrative that U.S. households have the ability to resume spending when the time is right.
Getting Out of the House
The U.S. Travel Association showed in a recent survey that 60% of folks in the U.S. are eager for travel. This is up from 54% just one month ago. But there is a big problem. Who is going to get on planes or trains? No one, unless it’s vital. That leaves us with our cars.
Sure, just riding around town is a distraction, and roads are certainly less congested these days. But you’re still stuck in a box with glass windows.
And what if you want to go somewhere different? Hotels have always been Petri dishes of germs. That was even before the novel coronavirus. So, this means traditional vacations just aren’t going to work. It also means traditional travel stocks aren’t worthy buys right now.
And the USTA data backs this up. Only 17% of folks think hotels are safe to visit now, and only 14% think planes are safe. Surely there’s a solution for this — after all, tourist travel contributed 10% of the overall global economy last year. That’s a big number to replace.
I’ve been thinking, and really working on this problem. Lucky for investors, I have problem-solving companies to buy. Now, these travel stocks are in two sectors that haven’t been working well recently. Lockdowns, a surge in unemployment and gut-wrenching market moves have not been conducive for their core sales.
But that’s now changing in a big way.
Outdoor Pursuits for Profits
RVs — including motorhomes and travel trailers — provide the perfect solution. Growing up, my mother graciously stayed at home to look after me and my siblings. My father was a professor, so he had flexibility in the summer months.
We would travel and explore the U.S. I got to visit nearly every corner of the nation, and well beyond. My family started with Volkswagen (OTCMKTS:VWAGY) micro-buses and tents complete with cots and air mattresses. Then, as my younger siblings came along, we had a travel trailer that we pulled with General Motors’ (NYSE:GM) finest station wagon. Later still, we would use motor homes to travel to and from beach houses with the whole family on board.
RVs are just as clean as you keep your home. No one comes inside, except you. They make for a perfect travel vehicle with a place to cook, sleep and stay. And thanks to the lockdowns, state and national parks face less traffic than in years past.
It’s also important to note that RV tech has changed a lot. Modern RVs can go off the grid thanks to fuel from solar power. The 4G and 5G evolutions provide communication and streaming entertainment.
Now, these RVs come at various cost levels, but none are really cheap. So, with all of the unemployment, who is going to buy a new RV? Well, as I discussed earlier, millions of Americans are still employed, and many are retired. This means there is still cash to buy these vehicles and explore the great outdoors.
Travel Stocks to Buy: Thor Industries (THO)
My first pick among travel stocks is Thor Industries (NYSE:THO). The company primarily focuses on North America and builds and sells motorhomes, trailers and related accessories and parts. Its brands are well-known to those that research the RV market — and they include Airstream, Heartland, Jayco and Starcraft.
The company’s sales were trailing off from late 2016 through the first quarter of 2019. But the last four quarters have seen improvements. I believe that the company will see even more improvement in the coming quarters.
Thor Industries has thinner margins, like many other vehicle companies. But it runs a tighter ship as a company with return on equity running at 10.2%. It has a good cash surplus compared to liabilities exceeding 40%. And while public, its debt-assets ratio is only at 33.7%.
Thor Industries (THO)
And THO stock pays a dividend yielding 1.4%. Even as the stock is beginning to get noticed as a problem-solving company, it is still valued at a 20% discount to its trailing sales. This travel stocks pick is a buy ideally in a tax-free account.
Marine Products Corporation (MPX)
Now, I spend time around the water, whether it be the rivers in lakes in Missouri or the Chesapeake Bay and Atlantic Ocean by Virginia. I have been on many boats — and even belong to a storied club, The Old Dominion Boat Club in Alexandria. Boats can be like a floating RV. They’re a vehicle of transportation, as well as a place to stay. And even if just used for a day out, boats provided socially distanced recreation.
Marine Products Corporation (NYSE:MPX) is a boat version of Thor. It has a diversified series of branded boats for fresh and saltwater. Its products truly span a wide variety of needs.
Revenues, like for Thor, have been trending down since late 2018. This reflects the market fall that you recall in the fourth quarter of 2018. And of course, the last quarter wasn’t good for its business.
But like for Thor, I see boats gaining demand. And this will be even more true as weather in the U.S. heats up with summer approaching.
Marine Products Corporation (MPX)
The company has loads of cash. Its cash and equivalents amount to 420% of current liabilities. And as for debt? There’s pretty much none. Marine Products’ debt-assets ratio runs at 0.1%.
MPX stock yields 2.5%, and the stock is beginning to get noticed like Thor. And the stock is a value as it is valued at only 1.6 times trailing sales.
It is a buy ideally in a tax-free account.
Neil George was once an all-star bond trader, but now he works morning and night to steer readers away from traps — and into safe, top-performing income investments. Neil’s new income program is a cash-generating machine … one that can help you collect $208 every day the market’s open. Neil does not have any holdings in the securities mentioned above.