Although the collective pent-up demand for social experiences amid the worst of the Covid-19 crisis led to the revenge travel phenomenon, this catalyst may be dying out. If so, investors may want to consider an important for portfolio protection: stocks to sell before they negative impact your winners.
At the start of the month, CNBC cited data from research company Morning Consult that showed travel intentions have flatlined or even decreased in many countries, most notably in Europe. Specifically, Morning Consult stated that intentions to travel dropped 11 percentage points in France and six in Germany since last year.
Such underperformance may be a harbinger for revenge travel sentiments in the U.S. Part of the problem for Europe is that the region’s economy stands on weak footing. If the same happens stateside, consumer confidence may similarly fall.
In that case, you don’t want to be tied heavily to this discretionary sector. On that note, below are stocks to sell, regrettably.
Delta Air Lines (DAL)
At first glance, Delta Air Lines (NYSE:DAL) doesn’t necessarily seem to rank among the stocks to sell, especially after its third-quarter earnings performance. Per CNBC, Delta posted adjusted earnings per share of $2.03, beating out the analysts’ call for $1.95. On the revenue side, the airliner fell just a bit short, ringing up $14.55 billion in sales against $14.56 billion expected.
Still, based on the surrounding circumstances of a challenging consumer economy, it was a good day at the office for Delta. Unfortunately, the same couldn’t be said about the resultant price action. Since the company’s Q3 disclosure, DAL shed 10% of equity value. And in the trailing one-month period, shares stumbled nearly 14%.
Although Delta generally delivered on the Q3 earnings front, looking ahead, risks such as the Hamas attack on Israel pose significant headwinds to air travel. Also, while management cited an increase in premium seats – such as premium economy or business class – that sentiment could crack.
Remember, major corporations are still laying off their workers, threatening revenge travel.
Hilton Hotels (HLT)
One of the world’s most famous travel-related brands, Hilton Hotels (NYSE:HLT) is synonymous with quality and luxury. During a time when people craved social experiences amid the forced quarantines of the pandemic, consumers were more than willing to splurge to make new memories. Plus, for U.S.-based travelers, households benefited from savings and stimulus checks.
But that was then. This is now. At the present juncture, the personal saving rate is down to 3.9% at last count. That’s conspicuously below the 6.4% printed in December 2019, which itself is rather low compared to the saving rate seen in prior generations. Put another way, people have fewer financial resources today than they did during the worst of Covid-19.
Fundamentally, that doesn’t augur well for businesses that banked on a continuation of revenge travel sentiments. Moreover, the options traders or the smart money seems to smell blood in the water.
In particular, institutional investors have been selling call options, betting that HLT stock won’t rise to hit the underlying strike price. That might be a sign to avoid Hilton Hotels for now.
Although ride-sharing platform Lyft (NASDAQ:LYFT) might not be directly impacted by a reduction in revenge travel as airliners or hoteliers, it will likely face significant pressure, making LYFT a possible candidate for stocks to sell. It’s unfortunate because the product itself is excellent. Whenever I need a ride, it’s my go-to platform. Still, the dark clouds over the travel sector warrant caution.
As I mentioned in my TipRanks article about rival Uber (NYSE:UBER), travel to and from the airport represents an important component of the ride-sharing industry’s business. To be fair, recent statistics are hard to come by because of the sudden and violent disruption of Covid-19. However, airports across the nation have implemented protocols to address the surge in traffic. Therefore, fading revenge travel would be bad news for LYFT.
Also, the company is struggling for growth right now. After spiking higher in 2021 and 2022, Lyft’s trailing-12-month performance is rather soft. With circumstances possibly about to worsen, it’s probably a name to avoid.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.