Is Covid at an End? The Data Says...
Andrew Zatlin here with a brand-new issue of Moneyball Economics.
As you've seen Omicron is spreading rapidly across the United States...
"OMI-NOUS" reads the headline of the Drudge Report.
"First Confirmed U.S. Death Due to Omicron" says CNN.com.
And Fox News says... well... nothing. Nada. Zilch.
So what's it going to be?
Are CNN and the Drudge right? Will we face a blizzard of virus cases? Will Omicron cause us to lock down again? Will case loads tank the markets? Or will it be a "nothing-burger," like Fox News implies?
Join me in our latest video, as I dig into my proprietary data, show you what's really happening across America, and reveal what to buy, hold, and sell in your portfolio.
For a full transcript of this video, see below.
Is Covid at an End? The Data Says...
This is Andrew Zatlin for Moneyball Economics — or for the next couple of weeks, I should say “Moneyball Economics: Hawaii edition.”
That’s right. I'm on vacation in Hawaii. But no matter where I go, Moneyball Economics is where my heart is. (And yes, that annoys the heck out of my wife — but, it’s true.)
I'm always thinking about how I can be an even better investor, and thinking about what's happening in the world of data and economics that could be affecting my stocks.
So in recent weeks, I've been sharing some ideas with you about how to position yourself successfully for 2022.
And today, I want to continue with that theme.
A Quick Recap
Last time, I shared the fact that interest rate hikes are an important theme to keep an eye on.
I want to make sure that, not only is my portfolio “rate proof,” but also that I’m taking advantage of opportunities to profit from higher rates.
As for the second theme:
Omicron is everywhere right now…
And yet I believe that COVID is almost over.
And now I'm going to share with you why I think COVID is almost over — even if there's Omicron, and even if there's “COVID Zeta.”
Simply put, I'm going to share with you why I think we're at the tail-end of COVID.
To me, the end of Covid will mean a return to normal…
And to gauge when we might reach this moment, I look at the travel sector.
That’s why, in today's episode, we're going to talk about travel, including what signals are flashing that tell us what’s in store. (Spoiler alert: we’re experiencing a little pullback right now, but I think travel will soon come roaring back.)
So let's talk about travel.
The Data I Always Trust
As I mentioned at the start, I'm in Hawaii right now.
That means I've been traveling and seeing some key things first-hand.
And as I look at the travel sector, I'm going turn to the data that I know and love and trust the most:
My hiring data!
I'm not going to wait for data that tells me what happened months ago...
Instead, I'm going to look at the current hiring data — the data that shows me whether companies are putting money where their mouths are…
In other words, if they really are hiring now…
And if that’s the case, what that means for the industry.
Like a Coiled Spring
Right now, across the board, the travel sector is acting like a coiled spring — it’s ready to explode. Here’s what I mean…
Let's start with airlines. Simply put, airlines are poised for liftoff (forgive the pun).
Now, for each of the airline companies that I track, hiring was roaring back. And then, very abruptly, it stopped.
In fact, many companies have even experienced a pullback.
Here’s what that pullback looks like.
First, we've got American Airlines:
And what I'm showing you is the actual hiring data, dating back to 2017. This data covers before Covid, during Covid, and now the tail-end of Covid.
So as I mentioned, hiring for these airlines was roaring back — Alaska Airlines, as you can see below, was roaring back. And then they slowed their hiring.
It’s the same story with Southwest Airlines, and the same thing with United Airlines. (And by the way, looking at Southwest Airlines, I want to call your attention to the fact that this is probably the only domestic airline among the bunch.)
And you can see that, even for Southwest, domestically, there's been a pullback.
And you can see that pullback across multiple companies. You can see it in Delta, where hiring didn't quite roll over, but it’s flatlined.
A Major Shift is Coming
So what do we do?
Well, I was recently on a flight to Hawaii, and I have to tell you: airports are packed.
People are traveling, especially for the holidays.
I look at that and I compare it to the Omicron fears that are in the media. And I think that consumer behavior is now leading the charge against “shelter in place” restrictions.
After two years, U.S. consumers are saying, “You know what, if you're telling us that we've been vaccinated, and that's still not good enough, I don’t know what to tell you.”
So I think we're gearing up for a [Zatlin with emphasis] major shift in attitude.
People will wear masks and get vaccinated, but that's about it. Everyone is going back to their normal, day-to-day routine.
But for now, we're seeing a little bit of pullback in travel. And this is despite the CEO of Southwest Airlines recently saying that its planes have HEPA filters onboard.
I think people are just sitting there saying, [Zatlin skeptical tone] “I don't know, it's a tube. I'm sitting in a tube with strangers.”
The bottom line: You want to watch what consumers are doing. You want to know where they're putting their money.
And as it relates to travel, this could be a case of business travel pulling back. It could be a case of consumers still traveling, but business travel companies pulling back.
The thing is, this isn’t going to last. In fact, it’s creating a short-term opportunity.
And that’s what we want to start thinking about.
Again, travel is a coiled spring, getting ready to burst.
The question becomes: When do we get into this sector? That's where I turn to my hiring data.
And that's what I'm going to be sharing with you right now…
Whether By Air, Or By Land
So far, we’ve talked about airline companies and how they’re clearly seeing a pullback, or at least anticipating a pullback in traffic. And so they've slowed their hiring.
But what about other players?
How about car rental companies? Whether you’re a consumer or a business, you likely use car rental companies.
And guess what? They were roaring to life, too.
Avis, Hertz — these companies were hiring like you wouldn't believe. In fact, they were almost back to pre-Covid levels…
And now they've also pulled back or flattened.
So just like airlines, we were seeing travel activity rise, but in the past couple months activity has slowed down.
And keep in mind: these companies tend to hire not just for today, but for a couple months in the future. So that's something we want to keep in mind…
It could potentially be Q2 2022 before this sector comes roaring back to life.
And that makes sense. Because by April, people will be going out more, and celebrating spring holidays.
Again, I think U.S. consumers are throwing in the towel and saying enough of COVID!
And furthermore, April is another four months away, so there’s likely to be even more advancement in the fight against COVID.
Plenty of Rooms at the Inn
So, we’ve seen that airlines have pulled back. Car agencies have pulled back, too.
But what about hotels?
Because again, hotels are where you're seeing a lot of foot traffic for travel — both holiday travel and business travel.
Well, it’s the same picture. The sector was roaring back to life — then, over the past couple of months, its resurgence paused or even retreated.
Take a look at Hilton: you’ll see a pause.
Take a look at Marriot: you’ll see a pause.
And here’s the thing: unlike airlines and car agencies, hotels have not hired at the same pace as before COVID.
In fact, the hotel I'm staying at told us that housekeeping isn't going to be turning over rooms as often as they used to. And that's interesting.
In part, that’s because of short staffing. But I think it's also because of budget management.
Hotels have realized that services like laundry, for example, require a large staff. So they've adjusted, and told guests, “You will not get turn-down service on a daily basis.” Remarkable.
Now let’s look at Extended Stay, which hasn’t just flattened, it’s retreated. Unlike Marriot or Hilton, Extended Stay is a 100% domestic hotel company.
The bottom line: airlines have rolled over a little bit, hotels have rolled over, and car agencies have rolled over.
The common theme? Sectors are pulling back…
And it's all about Omicron.
Not So Fast…
However, not every sector is pulling back.
If you look at destinations and experiences, you can see that travel in some segments is actually ignoring COVID.
For example, look at hiring for Carnival Cruise Lines. As you can see, there’s no pause.
To be fair, they’re not quite back to pre-Covid levels, but they're getting there.
Now let's look at the gambling sector.
Boyd Gaming, a large gaming and hospitality company, is hiring above pre-Covid levels. And it’s the same situation with MGM.
Keep in mind: these companies’ customers are gamblers and people who like to take cruises. Often, these are people who have money to spend.
In other words, it looks like the wealthy and the semi-wealthy have no hesitation going out and returning to their “pre-Covid” lifestyles.
That's very interesting. It could make for a possible investment opportunity down the road.
Another Booming Sector
Another sector that seems to be doing well (despite Covid) is travel agencies.
For example, look at Trip Advisor.
Trip Advisor is interesting to look at, both in terms of travel plans for right now, as well as plans for the future.
For example, people use Trip Advisor to book trips right now. But they also use it to plan for the future. (Remember, I believe April is when that coiled spring of demand takes off.)
And we also see the same thing with Yelp.
Yelp isn't really a travel company. But to me, it's a great bellwether company that tells me if consumers are going out.
That’s because Yelp looks at services, it looks at destinations, and it looks at restaurants. Essentially, Yelp is a service that the consumer turns to when they’re “out and about.”
Yelp’s going to help them figure out, “How do I enjoy where I am and where I'm going?” and Trip Advisor can provide the same service.
So for both of these companies, I see the consumer activity really really perking up.
Let's revisit Trip Advisor for a moment:
Trip Advisor’s hiring data is at pre-Covid levels. People are going out — Covid, be damned!
It’s the same thing with Yelp, which is almost at pre-Covid levels when it comes to hiring.
The Main Takeaway
Here’s the main takeaway: the travel sector is getting beat up right now…
And from a pricing segment, this offers deep, deep, deep value.
You've got a sector that has pulled back a little bit, but is ready to spring out.
Now, I have to acknowledge that I was surprised by COVID Omicron’s surge. Maybe you were, too.
I got into some travel stocks a little bit early, right before Omicron hit. And I did that primarily because of these numbers I'm seeing, the numbers I’ve shown you today…
As you can see, my hiring data showed that company after company after company in the travel segment was hiring — full-on hiring!
But that's why I time my investments the way I do, and why I give my trades enough time to work out!
That way, things like an Omicron or an external event has time to impact the market, pass, and go away.
That's why, moving forward, I'm going to give you some ideas about how to get in — and win.
In the meantime, from Moneyball Economics, “Hawaii” episode, this is Zatlin out.
I'll talk to you soon.
In it to win it,