It was no coincidence that Memorial Day weekend saw all U.S. states open up to some degree. The weather across much of the country was perfect for getting out and enjoying the outdoors, especially various bodies of water. And that means travel stocks should be back on your radar.
Tourism is a very big industry across the country, and many of those tourists are Americans.
For now, that matters. International flights remain limited, as both countries must determine their stance on travel. China, for example, slowed the reopening of its international flights again last week.
That means resorts, especially those with adult pastimes like gaming and racing, will be winners as the unlocking of America continues. In Las Vegas, that begins on June 4. In other states, the reopening fun has already begun.
At Growth Investor, I sounded the “all-clear” signal to hunt for growth buys during earnings season. Some stocks have simply been faster to recover than others. Below I have highlighted seven travel stocks to buy if the novel coronavirus continues to fade.
These travel stocks are all well positioned to fake full advantage of Americans’ rediscovered freedom to play once again.
- Penn National Gaming (NASDAQ:PENN)
- Newgioco Group (NASDAQ:NWGI)
- Churchill Downs (NASDAQ:CHDN)
- Golden Entertainment (NASDAQ:GDEN)
- Caesars Entertainment (NASDAQ:CZR)
- Eldorado Resorts (NASDAQ:ERI)
- Scientific Games (NASDAQ:SGMS)
Travel Stocks: Penn National Gaming (PENN)
The first of my travel stocks is Penn National Gaming. This gaming company began in 1982 and is now a major player in the gaming, horse racing and off-track betting industries.
It owns or leases 42 casinos and racetracks (with rooms, of course) including the Tropicana in Vegas and the Hollywood and Ameristar brands.
The fact that it has so many facilities across the country means people don’t have to travel far — or even fly — to get to one of its properties. The other plus for gaming is the facilities are very big which helps social distancing and the tracks are outdoors for the most part.
The stock is up 75% in the past 12 months and 25% year to date, including an 80% move in the past month.
Founded in Italy in 2000, the firm is now based in Canada. And its niche is online gaming and sport betting. It’s a tech company for the gambling industry.
And its platforms are both business-to-business and business-to-consumer. That means it operates its online gaming as a business and also licenses its technology to casinos to use as its sports book or i-gaming platform.
It’s also getting involved in the global growth of virtual sports, which is already starting to eclipse the market for traditional professional sports.
The stock is smaller than the ones on my Growth Investor buy list — its market capitalization is just $31 million — so it’s an aggressive bet on the development of i-gaming and its proprietary platform.
The stock is off 27% in the past year. If things start to open up it will benefit, but if lockdowns remain in place and economies suffer, it may sit at these levels.
Churchill Downs (CHDN)
That name may make you think of the first Saturday in May, when the Kentucky Derby is run, as it has been since 1875. And it’s that company, but things have changed significantly in recent decades.
CHDN now owns five racetracks, eight casinos, the country’s leading online wagering business and a great deal of content licensing and communications businesses.
It has a greater than $5 billion market cap, so it’s not your father’s racetrack any longer. It’s a diversified, well-capitalized entertainment company. And by the way, the Derby will be run in September this year.
The stock is up 36% in the past year, down 2% year to date and has a 0.5% dividend.
Golden Entertainment (GDEN)
The next company on my list of travel stocks is Golden Entertainment. It started as a slot route company, which means it puts slot machines in stores, taverns and airports. It has grown to be the largest slot route company in Nevada.
In 2010, it started to acquire casinos around Nevada. That was boosted by an $850 million acquisition of American Casino and Entertainment Properties in 2017. Currently, GDEN has 10 casino resorts. Nine are in Nevada and one is in Maryland.
With the Las Vegas Strip still on lockdown, generating revenue from its slot route keeps the money coming in until the casinos open up again. And given its numerous locations around Nevada, its properties will attract out-of-state neighbors who can make it to a casino in a couple hours’ drive. I’m always one to look for a savvy, solid business model, as my Growth Investor subscribers can tell you.
GDEN is off 5% in the past year and nearly 35% year to date. It only has a $360 million market cap, so it will be volatile. And right now, it looks like the worst is already priced in.
Caesars Entertainment (CZR)
Caesar’s Palace is one of Las Vegas’ icons and the namesake of the organization. CZR also owns Harrah’s and Paris, as well as 47 other properties and seven golf courses.
It has some of the most recognizable names in Vegas and that also means it brings in the biggest stars. Plus, Caesars Entertainment has many of the town’s top dining and entertainment experiences as well.
What’s more, with an $8 billion market cap, it has the kind of reserves to sit out the current lockdown. And with casinos set to open on a limited basis starting June 4, you can bet plenty of people will be back on the Strip in one or more of its properties.
CZR is up almost 30% in the past year, although it’s down 16% year to date. This will be a bellwether stock for the rest of the gaming resort industry.
Eldorado Resorts (ERI)
This Reno, Nevada-based firm has been around since the early 1970s and currently sports a $2.8 billion market cap.
It has grown from its Nevada base and now owns and operates 11 casino resorts — it calls them “racinos” for their blend of racing and casinos — as well as all the amenities that go along with the properties. And those properties span the length and breadth of the country at this point, including dockside casinos up and down the Mississippi River.
Having a healthy geographic distribution is a good strategy in times like these, since it makes it easier for more people to access its facilities.
The stock has been hit — it’s off almost 30% in the past year, with all of that coming in 2020, where it’s off 40%. But with reopening just a few days away, things should be turning up.
Scientific Games (SGMS)
The last of my out-of-the-box travel stocks is a little different. This company is all about the machines and not about properties. It’s a leading provider of gambling products to the gaming and lottery industries around the world.
That means whether you’re playing slots or keno, or just buying some instant lottery tickets at the gas station, SGMS likely has a hand in it.
The good thing about this model is that its products are available to people beyond the traditional betting public. People often buy a quick pick when they’re grabbing groceries or looking to see if they’re having a lucky day. Those kinds of revenue streams matter nowadays.
The stock has been taken down with the rest of the sector. SGMS is off 15% in the past year and 40% year to date. As gaming bounces back, so will the stock. It has a market cap of $1.5 billion, so it will be relatively volatile, but the thing to watch is its numbers rather than the broader sector. Its numbers won’t likely move in lockstep with larger casinos.