The stock market seems to be pricing in a lot of “normality” into valuations across the board. Stocks aren’t cheap, with investor sentiment broadly bullish. That makes scouting out bellwether stocks, true signals our world is returning to pre-pandemic ways, a difficult task.
Furthermore, what’s “normal” is a matter of subjective interpretation. However, when I think of what normal looks like, it looks a lot more like 2019. The pandemic has completely altered the way we live and work. In some ways good. Others, not so much.
Here are 7 bellwether stocks to buy:
- American Air Lines (NASDAQ:AAL)
- Carnival (NYSE:CCL)
- Marriott International (NASDAQ:MAR)
- Nordstrom (NYSE:JWN)
- Darden Restaurants (NYSE:DRI)
- Planet Fitness (NYSE:PLNT)
- Airbnb (NASDAQ:ABNB)
These are stocks that have shown resilience of late, and are mainly stocks that sold off dramatically when we entered the pandemic. Again, investors need to remember that the stock market right now is pricing in an incredible amount of growth coming out of this pandemic. However, for those bullish on an accelerated rebound coming out of this pandemic, these are stocks to take a look at right now.
Bellwether Stocks to Buy: American Air Lines (AAL)
Thinking of taking a nice trip to Hawaii? I mean, without having to get tested and quarantine.
Well, it appears investors seem to think we do. Indeed, pent-up demand for discretionary travel is expected to unleash a wave of travel demand the likes of which we haven’t seen in a very, very long time. If the current trajectory is any indication, it looks like travelers are already packing their bags and going, wherever they can.
The U.S. has now had 11 consecutive days in a row of 1 million-plus travelers at U.S. airports, a staggering contrast to one year ago. Yes these numbers are still way down from 2019, but travel volumes right now are approximately triple that of this time last year.
Indeed, American Airlines stock today certainly seems to represent some hope for investors. The company’s stock price has climbed nearly 270% from its pandemic lows. However, American Airlines stock continues to be significantly depressed from its all-time highs, as profitability was already on the decline prior to the pandemic.
All that said, this is a stock to watch for investors focused on the future. If sentiment continues to grow more bullish for airlines, American Airlines could be one of the biggest beneficiaries.
Another one of the best stocks to buy for those expecting sunny days ahead is Carnival.
Like the other stocks on this list, Carnival took a harsh beating during the pandemic for good reason. Cruises all but ground to a halt, as a number of cruises were identified as major super-spreader events amid the onset of the pandemic.
However, there’s good news. This is also a stock that has more than tripled from its pandemic-driven selloff last year. While Carnival continues to bleed cash, and is unlikely to get anything in the way of a bailout from the government, the company has been finding ways to make its way through the pandemic.
Carnival has issued debt on a number of occasions. Taking on massive debt when a company’s cash flows are non-existent is never a good thing. However, the recent bond offerings were at a much more reasonable 7.6% yield, compared to the 12% bonds it was forced to issue at the onset of the pandemic.
Indeed, many analysts believe the bond market is better at pricing risk than the equity market. From that perspective, things are looking much better for Carnival. There may be room for CCL shareholders to be optimistic still.
Marriott International (MAR)
The dramatic plunge in travel demand has affected more than airlines. Stocks in the hotel sector also fell off a cliff last March. Marriott International was certainly no exception.
Just a year later and it’s as if the pandemic never happened. Stocks like Marriott are now trading right around pre-pandemic levels as investors pile into any turnaround play they can find.
Indeed, sentiment appears to be broadly bullish for travel demand coming out of this pandemic. If you’re more bullish than the market, Marriott stock will be one to watch closely. The hotel sector will continue be heavily scrutinized in coming quarters. However, it appears Marriott has done a relatively good job of managing its core business during the pandemic.
Indeed, one thing I like about Marriott right now is the fact this company’s debt load and share count have remained roughly the same through the pandemic. That’s good news for fundamental investors seeking stability in times of uncertainty.
This is a stock that saw its revenue decline substantially (more than halved), though Marriott’s losses weren’t as bad as other travel-related sectors. Accordingly, the rebound in MAR stock may be more warranted than in a lot of other highly-cyclical plays right now.
Higher-end retailer Nordstrom is a bellwether stock more than any of its retail peers. This is because a rather wide swath of retail stocks have been swept up by “meme stock” fever of late. But for whatever reason, Nordstrom appears to be a stock that was immune. Its products might be trendy, but JWN stock just can’t say the same.
Rather, Nordstrom has been a retail stock with a stock chart that more closely approximates the other reopening plays right now. Its valuation is more reasonable than its retail meme stock peers, but with the same underlying growth thesis.
As employment metrics (are expected to) continue to improving as we come out of this pandemic, high-end retail should do quite well. In fact, investors are betting on it. Nordstrom has actually performed decently well through the pandemic, due to its strong and growing e-commerce presence. In fact, I think this catalyst should bode well for those attempting to anticipate what the future may hold for the retail sector.
Thus, the company’s more hybrid business model should approximate the market’s overall sentiment more closely than its retail brethren. Nordstrom is about as high-quality a retail pick as one can choose right now, so I think it’s an interesting one for fundamentals-oriented value investors to consider.
Darden Restaurants (DRI)
Tired of eating at home? Dying to go out and eat with your friends, without having to wear a mask when you’re not sitting at the table?
You aren’t alone.
Darden Restaurants is a company that puts the “full” in full-service dining. Darden is the parent company of a range of household restaurant banners in the U.S. These include Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s.
Pandemic-related restrictions have really put a damper on restaurant stocks over the past year. Yes Darden, like many of its economically-sensitive peers, has rebounded to pre-pandemic levels. However, Darden’s continued growth prospects really rely on the economic recovery turning out as planned.
It appears the Biden Administration’s stimulus packages are assuaging concerns about muted discretionary spending in coming quarters. Indeed, investors appear ready to bet on restaurants returning to normal soon. Likewise, if we don’t see a return to normal, investors can bet their bottom dollar this will be reflected in stocks like DRI.
Darden’s trading near its all-time high right now, so it’s pricing in a lot of growth. This appears to be a stock only for the biggest bulls out there today.
Planet Fitness (PLNT)
The only pure-play gym chain on the stock market, Planet Fitness is certainly a bellwether stock for those considering what a return to normal looks like.
Many of us may have put on more than a few pounds during the pandemic. In fact, a recent study showed more than 40% of Americans gained weight during the pandemic.
Going back to the gym sounds like a great idea right now for many. Those who couldn’t afford a Peloton (NASDAQ:PTON) bike or a private trainer (so, a lot of us) are looking forward to getting back into the gym. As more restrictions are lifted state by state, expectations are rising that Planet Fitness and its gym peers may do well in this sort of environment. Accordingly, it appears right now investors are banking on a serious demand surge.
It may be unsurprising to see Planet Fitness has more than doubled from its pandemic lows. It’s actually breached its all-time high earlier this year. Indeed, this is one of those stocks that has some pretty serious bullish sentiment built in today. For those wondering if tomorrow brings brighter days ahead, PTON stock sure screams “yes.”
Airbnb has grown to become a ubiquitous stocks in the travel sector. Anytime a company name gets used as a verb, you know it’s doing something right.
Such is the case with Airbnb. This company’s innovative technologically-oriented solution for hospitality seekers has unsurprisingly taken a hit during the pandemic. However, unlike its peers on this list, the company went public less than a year ago. Thus, we’re unable to see what its stock price might have done pre-pandemic.
Year-to-date, Airbnb has performed well. This stock has provided investors with a gain of more than 30%, amid an increasingly bullish post-pandemic outlook.
Indeed, we’re all itching to get out and go somewhere. Even if that somewhere is a domestic destination (Airbnb is hoping so). As pandemic-related restrictions are lifted, ABNB stock should continue to reflect these increasingly bullish expectations in its stock price.
Again, if things turn sour, this sentiment will likely be reflected in ABNB stock. It’s a stock with a tremendous amount of growth built into its valuation right now. Accordingly, Airbnb investors are perhaps more highly leveraged to the economic outlook than their peers.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.