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2 Travel And Leisure ETFs For The Summer Holiday Season

Published 05/16/2022, 04:07 AM
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Memorial Day, at the end of May, marks the start of the US summer travel season. And this year, according to the US Travel Association, “about 6 in 10 Americans are planning at least one summer trip.”

In 2019, before the coronavirus pandemic, the travel and tourism industry contributed well over $1 trillion to US gross domestic product (GDP).

While Americans gear up to enjoy a more open world this summer, investors are researching travel and leisure stocks that stand to boost revenues and profitability.

Warmer weather, as well as time off from work and school, will also put the focus on leisure and entertainment companies as this year “spending is forecast to exceed the pre-pandemic peak by 14%, following the plunge in 2020.”

However, consumers and businesses are also keeping a close eye on inflation, especially soaring energy prices. In addition, the ongoing geopolitical tensions and resurgence of COVID-19 cases in China still imply potential setbacks to the travel sector’s recovery.

As such, volatility in share prices of travel and leisure companies could continue well into the summer months. So far, in 2022, the Dow Jones Travel & Tourism Index has lost 26.6%. Similarly, the Dow Jones Travel & Leisure Index is down 20.2%.

With that information, today’s article introduces two exchange-traded funds (ETFs) that deserve readers’ attention ahead of the summer travel season.

1. Invesco Dynamic Leisure and Entertainment ETF

  • Current Price: $40.44
  • 52-week range: $38.29 - $54.62
  • Dividend yield: 0.52%
  • Expense ratio: 0.55% per year

Our first fund, the Invesco Dynamic Leisure and Entertainment ETF (NYSE:PEJ), provides access to shares of leisure and entertainment firms. It started trading in June 2005.

PEJ Weekly Chart

PEJ, which tracks the Dynamic Leisure & Entertainment Intellide Index, currently holds a basket of 31 stocks. The top 10 names account for close to half of net assets of $1.3 billion. Put another way, it is a concentrated fund.

Sysco (NYSE:SYY), which distributes food and related products; McDonald’s (NYSE:MCD); Marriott International (NASDAQ:MAR); online travel agency Booking (NASDAQ:BKNG); Fox Corp (NASDAQ:FOXA); and Walt Disney (NYSE:DIS) lead the names on the roster.

Around half of the companies in the portfolio come from the hotels, restaurants, and leisure segment. Next are businesses from the entertainment industry (30.8%), followed by media (13.4%), food and staples retailing (4.7%), and interactive media and services (2.8%).

PEJ is down roughly 17% since January and 5% over the past 12 months. It hit a record high on June 2, 2021, but is currently changing hands at a 52-week low. Those traders who watch price and time cycles to analyze potential turning points may want to pay attention to the current levels.

Trailing P/E and P/B ratios stand at 33.05x and 4.85x. A potential decline below $40 would improve the margin of safety for readers who expect spending by the US consumer to stay strong in the coming months..

2. SonicShares Airlines Hotels Cruise Lines ETF

  • Current Price: $4.16
  • 52-week range: $3.80 - $6.35
  • Expense ratio: 0.75% per year

Recent metrics point out that the global tourism market could grow from $3.95 trillion in 2021 to $4.55 trillion this year, at a compound annual growth rate (CAGR) of over 15%. Meanwhile, the World Travel & Tourism Council (WTTC) expects the travel and tourism industry to create nearly 126 million new jobs globally over the next decade.

Next up on our list of funds is the SonicShares™ Airlines, Hotels, Cruise Lines ETF (NYSE:TRYP). It offers exposure to a global portfolio of companies in the airline, hotel, and cruise line industries.

TRYP Weekly Chart

TRYP tracks the Solactive Airlines, Hotels, Cruise Lines Index. The fund was launched in May 2021, and oversees $11.42 million in net assets, so it is a relatively new and small fund without much trading history.

With a portfolio of 61 mid- and large-capitalization (cap) companies, the fund is heavily weighted toward those based in North America (65.8%). The remaining companies come from Europe (17.4%), Asia/Pacific (16.2%), and Central and South America (0.7%).

In terms of sub-sectoral allocations, we see hotels, restaurants and leisure (39.7%); airlines (38.6%); and equity real estate investment (21.7%). The top 10 holdings comprise almost half of the fund.

Among those names are VICI Properties (NYSE:VICI), Host Hotels & Resorts (NASDAQ:HST), Marriott International, Delta Air Lines (NYSE:DAL), Hilton Worldwide Holdings (NYSE:HLT), and Southwest Airlines (NYSE:LUV).

TRYP hit a 52-week low on Mar. 8. As we write, it is down 10.4% year-to-date (YTD) and 18.5% over the past 12 months. Buy-and-hold investors may want to keep TRYP on the radar screen.

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