Hospitality Stockwatch – July 2024
Authors
Arun Upneja, Ph.D. MBA, Dean, Boston University School of Hospitality Administration
Steve Kent, Ph.D., CFA, Assistant Professor, Molloy University-School of Business
Over the past few years, investors have focused on how large cap, mega tech companies have dominated the broad stock market. While the hospitality sector impacts the larger economy, its weighting in the market indices is rather small.
To put this notion in perspective, the Hospitality Stockwatch tracks over 125 names across 11 different subsectors. However, only 23 of the stocks are included in the S&P500, and combined they only have a 1.83% weighting. Microsoft alone has about four times the impact on market performance. Most portfolio managers need to get MSFT right and can miss out on hospitality stocks.
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View previous Hospitality Stockwatch Issues
However, like an ocean current rolling slowly and gradually growing, the subsectors, including hospitality stocks, are starting to make waves. Portfolio managers have been taking notice and shifting to a more diversified view, especially since trends in travel have generally been positive.
There is some hope that the shift away from these mega cap tech stocks could benefit the rest of the stocks in the S&P 500, including the stocks in the Hospitality Stockwatch. Stock market concentration is not that unusual and goes back to “The Nifty Fifty,” a group of 50 stocks in the 1960s and 1970s that were favored by investors at that time.
Further evidence of this trend, recently Morgan Stanley published a paper, “Stock Market Concentration: How Much Is Too Much.” The report points out the precedent for turnover of the market leaders, and that very few of them remain at the top for more than a few years. All of which is to say, keep your eyes on the Hospitality Stockwatch for rising tides coming ashore!
Winners and Losers
Broadly speaking some of the trends in performance we saw earlier in the year carried over in June. For example, cruise stocks continue to be outperformers with Viking, a recent IPO, and Royal Caribbean both showing great performance. In contrast, car rental continues to struggle down 14% in June and an over 50% loss year-to-date.
Cedar Fair and Six Flags both have shown great performance as we suspect investors are looking forward to the recently merged operator’s synergy opportunities along with a generally positive view toward daycation amusement park visits. Hotel stocks also had a good month perhaps in response to the positive commentary coming out of the NYU and Morgan Stanley conference in the first week of June.
Second quarter results will start to be reported over the next several weeks. Early commentary suggests solid trends to continue for most sectors without significant upside or downside surprises.
References