While the Delta variant of the coronavirus pandemic presents hurdles, the global economic recovery continues, and a big part of that equation is the resurgence of the travel and leisure industries.
Some exchange traded funds are more levered to that theme in others. Put the newly minted ALPS Global Travel Beneficiaries ETF (NYSEARCA:JRNY) in the “solid leverage” category. JRNY, which debuted last week, could have something many rookie ETFs crave: good timing.
The new fund tracks the S-Network Global Travel Index, which is a basket of airlines, hotels, casinos, and cruise lines as well as companies that support travel activities, luxury retailers, and purveyors of leisure activities.
“The S-Network Global Travel Index is compiled based upon a clearly defined rules-based methodology, which is overseen by an Index Committee,” according to the index provider. “The S-Network Global Travel Index selects companies with superior growth characteristics that make a significant impact in the global travel industry.”
JRNY Tailwinds
JRNY has some obvious and less overt tailwinds. For example, it’s clear that many folks around the world were worn out by 2020 shelter-in-place directives. This year, they want to get out and enjoy life again. In the U.S., things are starting to get back to some sense of normalcy. While masks are still required in many leisure venues, the accessibility of COVID-19 vaccines makes airline travel not only possible, but potentially less risky.
Adding to the JRNY case is that prior to the global health crisis, the global travel and leisure industries were growing more rapidly than the global GDP, fueled by growing middle classes in developing economies.
Zeroing in on some of the industry groups represented in JRNY, domestic airlines are pushing employees to get vaccinated. For investors, JRNY’s airline exposure is relevant because, with the support of the federal government, the industry is on firmer financial footing today than it was at the onset of the pandemic.
Speaking of financial sturdiness, there’s plenty of that be found in the casino business and Las Vegas is rebounding more rapidly than other gaming markets. In new coverage out Tuesday, Wells Fargo analyst Daniel Politzer waxed bullish on names such as Caesars Entertainment (NASDAQ:CZR) and MGM Resorts International (NYSE:MGM).
“Given MGM’s long-term track record in allocating capital, we understand this concern, though believe this time is different and that MGM will exercise prudence and sound judgment,” said Politzer. “And while we do think M&A will likely be the most substantive use of MGM’s capital, we think that over the past 18 months, MGM’s board/management team has earned the benefit of the doubt and that its $10B cash balance should be viewed as an asset, not a liability.”
Other travel and leisure ETFs include the VanEck Vectors Gaming ETF (BJK) and the U.S. Global Jets ETF (JETS).
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.