Holiday season

2 travel and leisure ETFs for the summer holiday season

Memorial Day in late May marks the start of the summer travel season in the United States. 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 more than $1 trillion to the gross domestic product of the United States ().

As Americans prepare to take advantage of a more open world this summer, investors are looking for travel and leisure stocks that can boost their earnings and profitability.

Warmer weather, as well as time off from work and school, will also stress leisure and entertainment businesses, as this year “spending is expected to be 14% above the pre-pandemic peak, after the fall of 2020″.

However, consumers and businesses are also watching closely, especially soaring energy prices. Additionally, the ongoing geopolitical tensions and resurgence of COVID-19 cases in China still imply potential setbacks for the recovery of the travel industry.

Thus, the volatility in the stock prices of travel and leisure companies could continue during the summer months. So far in 2022, the Hint lost 26.6%. Likewise, the Hint is down 20.2%.

With that information, today’s article features two exchange-traded funds (ETFs) worthy of 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%
  • Spending rate: 0.55% per year

Our first fund, the Invesco Dynamic Leisure and Entertainment ETF (NYSE:), provides access to shares of leisure and entertainment companies. It began marketing in June 2005.

PEJ, which tracks the Dynamic Leisure & Entertainment Intellide Index, currently holds a basket of 31 stocks. The top 10 names account for nearly half of net assets of $1.3 billion. In other words, it is a concentrated fund.

Sysco (NYSE:), which distributes food and related products; McDonald’s (NYSE:); Marriott International (NASDAQ:); online travel agency Reservation (NASDAQ:); Fox Corporation (NASDAQ:); and waltz disney (NYSE:) lead the names on the list.

Around half of the companies in the portfolio are from the hotel, restaurant and leisure segment. This is followed by companies in the entertainment industry (30.8%), followed by media (13.4%), food and basic retail (4.7%) and interactive media and services (2.8%).

The PEJ is down about 17% since January and 5% over the past 12 months. It hit an all-time high on June 2, 2021, but is currently changing hands at a 52-week low. Traders watching price and time cycles to analyze potential reversal points may want to pay attention to current levels.

The remaining P/E and P/B ratios stand at 33.05x and 4.85x. A potential drop below $40 would improve the safety margin for readers who expect US consumer spending to remain strong in the months ahead.

2. SonicShares Airlines Hotels Cruise Lines ETF

  • Current price: $4.16
  • 52 week range: $3.80 – $6.35
  • Spending rate: 0.75% per year

Recent metrics indicate 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 worldwide over the next decade.

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

TRYP Weekly Chart

TRYP follows 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-cap (cap) companies, the fund is heavily weighted towards those based in North America (65.8%). The other companies come from Europe (17.4%), Asia/Pacific (16.2%) and Central and South America (0.7%).

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

Among these names are VICI properties (NYSE:), Host Hotels and Resorts (NASDAQ:), Marriott International, Delta Airlines (NYSE:), Hilton Worldwide Holdings (NYSE:), and South West Airlines (NYSE:).

TRYP hit a 52-week low on March 8. At the time of writing, 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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