Investors experienced a crazy adventure in 2020. Initially, the stock market suffered a heavy blow due to the COVID-19 pandemic, but as the year passed, stock prices began to rebound. Stocks seem insignificant, or at least they can overcome the huge economic difficulties caused by the epidemic.
The new year brings the hope of a vaccine, hoping that it will restore normal life and promptly promote economic recovery.Three Motley Fool contributors think AerCap Holdings (New York Stock Exchange: AER), Ford (NYSE code: F)with carnival (New York Stock Exchange: CCL) (New York Stock Exchange: CUK) Stocks worth buying for economic recovery.
The best way to invest in travel recovery
Lou Whiteman (AerCap): During the pandemic, airlines were hit hard, and the stocks that depend on airlines for revenue also fell along with them. Among the casualties was AerCap, which bought aircraft and leased them to airlines. At the beginning of the pandemic, the company’s stock lost nearly 75% of its value because investors worried that the highly leveraged business would be forced into bankruptcy due to airlines that could not pay their bills.
These investors underestimated the strength of AerCap’s balance sheet. The company was forced to incur more than $1 billion in expenses to offset the value of its aircraft portfolio and delayed more than $350 million in lease payments for its hard-hit customers. But as of the end of September, AerCap’s total liquidity is still more than 11 billion U.S. dollars, if the situation worsens, it can still borrow 25 billion U.S. dollars of undisposed assets.
With the advent of the vaccine, the situation here should not get worse. It will take years for airlines to rebuild their damaged balance sheets, but with the increasing popularity of vaccines, over time, we should see a slight increase in travel demand. Even if it is not enough to ensure that airlines are profitable in 2021, it should be enough for them to pay their bills, which means that AerCap’s business will return to normal even before travel returns to pre-pandemic levels.
If anything, the multi-billion dollar airlines that survived the crisis may focus more on leasing aircraft after the crisis rather than buying them and putting increased debt on their balance sheets. However, AerCap’s stock continues to lag the market, and as of this writing, AerCap’s stock is actually lagging the market. U.S. Global Jet Year-to-date airline exchange-traded funds (ETF).
The market was wrong about this. If you think travel demand will eventually come back-I do-AerCap should see important developments in the coming quarters.
Why Ford might be the car growth story next year
John Roswell (Ford): I know that the idea of investing in Ford is still a headache for growth-conscious investors, they seem a bit silly Tesla Earnings in the past year. But please allow me to be here because there are two good reasons that Ford will be an unexpected market beater in 2021.
First, driven by large automakers, stock prices tend to follow sales, and in the early stages of economic recovery, auto sales tend to rebound. The post-COVID recovery is not exactly the same as the typical post-recession rebound, but the rebound in consumer and business confidence will drive sales of cars, trucks and SUVs soaring in 2021.
Second, Ford Motor’s stock has outperformed most other automakers this fiscal year. continued Recovery (2010-2011), because when buyers return, blue oval-shaped high-quality fresh products enter the dealer’s showroom, and competitors scramble to catch up. This time too.
Ford’s new 2021 F-150 pickup truck, the new Bronco Sport SUV and (in the case of Tesla) the new electric Mustang Mach-E have all begun shipping to dealers. The timing couldn’t be better: the F-150 is Ford’s best-selling product, and the other two are vehicles that bring curious consumers to the showroom.
More things will emerge in 2021, including the highly anticipated new Bronco, an updated version of Ford’s large Expedition SUV, and a new small pickup that may be called Maverick. Going further, we look forward to the new electric version of the F-150 and the best-selling Transit commercial van, as well as the brand new (non-electric) Mustang.
Ford Motor’s stock price has declined in the past few years because of its growing product portfolio. Ford cut its dividend in the early days of the pandemic (when the outlook was bleak) to no avail. But now, just like the end of the epidemic is coming, Ford’s product line looks very strong. If the next few quarters go well, the dividend can be resumed sometime next year. All this bodes well for Ford stock in 2021.
Purchase a cruise ship before it returns to normal
Rich Smith (carnival): The coronavirus has destroyed the cruise industry in the United States, and it took 75% of the time that year was restricted to the “No Navigation” order issued by the Centers for Disease Control (CDC). Even the emergence of the “framework” for “conditional navigation” at the end of October did not eliminate the pain of the aviation industry, because so far, no one has sailed outside the United States.
As 2020 is drawing to a close, the share price of Carnival (the largest company in the industry) is still down 53% from a year ago. But all of this may change in 2021.
Cruise companies have become ubiquitous and are preparing to carry out passenger-free “simulated voyages” to obtain CDC certificates, which will enable them to reopen. Therefore, cruise companies have begun to plan at least short-term cruise trips, such as the 18 trips from Canada to Alaska that Carnival plans to start in May 2021.
It is no coincidence that May (or June or July) is the most frequently cited month. This is the time when most Americans who want to be vaccinated against coronavirus are vaccinated, thereby reducing the health risks of cruise. If all goes well, the carnival situation should begin to return to normal in the second half of the year.
What will “return to normal” look like? Let us assume, for example, that in 2022, Carnival can do close to the level of business it enjoys in 2019. This means approximately $21 billion in revenue and $3 billion in profits.With a recent market value of $24 billion, Carnival’s P/E ratio is only eight times the P/E ratio-approximately half According to data from S&P Global Market Intelligence, the stock’s average forward price-earnings ratio over the past 10 years.
In other words, I think the potential of Carnival stock is roughly double As investors begin to look forward to gains in 2022, stock prices will rise next year. I think this may make Carnival Corporation’s stock a big winner in 2021.