Trains, boats, and planes, not to mention buses, should be an obvious way to benefit from the resumption of life as we knew it.
But the further way is far from clear. Metaphors like “buckle your seat belts for a thrilling ride” may be stereotypes, but they encapsulate the confidence needed to venture into stocks that Interactive Investor’s Richard Hunter calls the “high-risk recreational game.”
It may seem capricious to look at transport stocks when Portugal has just been removed from the green list and stocks have taken a hit, as we explain in our market report today.
Ready to go: Travel agencies hope that the introduction of vaccines will create a lot of catching up to do
But often the best time to invest is when prices hit rock bottom – it can be darkest just before dawn.
As the data on the most sought-after stocks on investment platforms shows, the adventurous seem ready for some thrill as vaccines will eventually create a huge backlog in travel – and it appears that resilient companies will seize the opportunity now.
Ryanair argues that it can increase its market share across Europe. That optimism drove Easyjet shares from 460p in November to 934p today.
But UBS says the rebound is already in the price and is hoping to return to 1,796p by mid-June 2018.
The challenges that transport companies face are increasingly coming into focus. The government’s traffic light system combined with the cost of testing makes vacations abroad unattractive for many families.
The planned near-nationalization of the rail system will lead to massive upheavals and many employers seem to be satisfied with making home work almost permanent.
Airline passenger numbers this year are expected to be around 52 percent of pre-pandemic levels.
Since January, the shares of IAG, owner of British Airways, have risen 23% to 196.34 pence.
But they’ll likely only drop to 447p, their level at the start of the pandemic when executives – the most lucrative clientele – leave Zoom.
Airline passenger numbers this year are expected to be around 52 percent of pre-pandemic levels
Analysts’ 12-month target prices for IAG shares (the highest is 280p) reflect skepticism about a short-term surge in these passengers.
The industry’s global losses are expected to be nearly £ 34 billion this year, compared to nearly £ 90 billion in 2020.
However, some savings are being offset by the rising cost of the tradable emission allowances they need to buy to cover the emissions.
These loans are expected to be even more expensive. Almost every assessment of the airline’s prospects uses the word “uncertainty”.
This word is now also being applied to the rail industry following proposals for reorganization under a new operator, Great British Railways (GBR).
That news led to a sharp decline in shares in Trainline, the ticketing app which, in addition to a decline in commission income, could face competition from GBR’s own app. However, Trainline claims that its app is “a huge differentiator and difficult to replicate”.
Trainline directors also bought the shares. Are you betting that your technology will end up powering the GBR app, given the government’s poor record on such ventures or a new age of the train?
The lack of clarity about the future may be seen in some circles as normal in the rail sector and explains why the GBR plan has had little impact on the shares in the First Group.
Ryanair argues that it can increase market share across Europe “especially if competing airlines have significantly reduced their capacities or are down”.
The company is selling some of its US bus companies to focus on its Great Western Railway and other franchises.
The dispute over that divestment may have overshadowed the emergence of something resembling the prospect for UK bus and rail companies.
Even a small environmental shift away from car use – which typically made up 60 percent of commuter journeys – could boost Go Ahead, National Express and Stagecoach, whose shares have already begun to revive.
The conviction that we want to return to the distance and to work, despite the various doubts, will cause some investors to flutter about transport stocks.
You may have little support for such an outcome if you have money in the popular Baillie Gifford European Growth, which has a stake in Ryanair. The value-driven Aurora Trust holds this stock along with Easyjet.
If you’re looking to support 21st century transportation in all its forms, the iShares Transportation Average ETF might be worth a look.
Next month the fund will begin tracking the S&P Transportation Select Index, which includes the Union Pacific and Kansas City Southern railways.
Currently the fund is linked to the Dow Jones Transportation Average Index, the oldest in the world, which was founded in 1896 and is now considered out of date. This is a reminder that traffic is about to head in a new direction.
But, and I apologize for another metaphor, there is no roadmap yet.
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