Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }
Coronavirus information
Coronavirus information
The Zero Canada Project provides resources to help you make the most of staying home.
Visit the hub

The cruise ship Diamond Princess, where dozens of passengers tested positive for coronavirus, is seen at Daikoku Pier Cruise Terminal in Yokohama, south of Tokyo on Feb. 10.

Kim Kyung Hoon/Reuters

Bargain-hunting investors are eyeing the shares of airlines, hotels, cruise lines and other companies that have been among the worst-hit by the coronavirus outbreak.

The recent declines have brought down the valuations of travel and leisure-related companies to levels some investors are believe are attractive. American Airlines Group Inc, for example, now trades at a forward price-to-earnings ratio of 3.3, compared to 5.4 at the start of the year. Marriott International trades at 17.6 compared to 23.2, while the forward price for Carnival Corp has fallen to 6.4 times forward earnings from 11.6 at the start of the year.

Few believe these companies are in the clear, as the outbreak continues to accelerate beyond China’s borders to the United States and other countries. Yet the sharp decline in stocks tied to tourism and leisure in the wake of the virus’ spread has pulled down valuations in the battered sectors and attracted the attention of investors looking to take advantage of recent market declines.

Story continues below advertisement

Noah Hamman, chief executive of Advisorshares, an investment firm that focuses on actively-managed exchange-traded funds, is adding to positions in airlines that focus on regional and domestic travel, such as Hawaiian Holdings Inc and SkyWest Inc, a bet that these carriers have better prospects of surviving a travel slowdown because they are more often used for regional and domestic trips.

At the same time, he is short shares of American Airlines, which has a greater reliance on revenue from international travel. Shares of the company are down nearly 43% for the year to date.

“Those smaller regional carriers we think can weather the storm quite a bit more … but the big carriers we think will continue to struggle,” he said.

The International Air Transport Association said Thursday that the coronavirus outbreak could slash up to $113 billion in airline revenues this year, an estimate more than 3 times greater than its projections from two weeks ago. Budget carrier Southwest Co, meanwhile, predicted up to a $300 million hit from first-quarter revenues.

Investors in the coming week will be looking for signs of how much the virus’ spread has accelerated in the United States and other regions. Sectors hard hit by the outbreak are likely to join a broader market selloff if it appears the outbreak is spreading faster than expected.

Bond yields plunged and U.S. stock futures were down sharply on Friday morning as heightened fears about the economic damage from the coronavirus epidemic drove investors to perceived safe havens such as Treasuries and gold.

Jamie Cox, a financial advisor at Harris Financial, remains bullish on the shares he owns of Delta Air Lines, a bet that consolidation in the industry has reduced the number of competitors and will allow airlines to weather a slowdown in traffic without cutting their prices in a bid to lure back customers.

Story continues below advertisement

“If you want to be able to travel, you have to use these carriers because there are so few of them,” he said.

He’s far less optimistic on a rebound in shares of cruise companies, some of which have dropped by 50% or more since the start of the year.

News reports about coronavirus outbreaks on ships like the Diamond Princess--a vessel owned by Princess Cruises that was moored in quarantine for two weeks off the coast of Japan in February - will likely weigh on investment sentiment toward these companies, he said.

“People are going to remember the Diamond Princess a lot longer than they will that airlines canceled flights to China,” he said.

Not all investors are ready to jump in.

Brian Frank, portfolio manager of the Frank Value Fund, said that cruise liners and airline companies would need to fall by another 50% or more for them to become attractive given the fact that they were trading at near-record valuations before the coronavirus outbreak.

Story continues below advertisement

His fund has built up about 60% of its portfolio in cash and he is waiting for further declines before buying, he said.

“There’s no shortage of great companies, just a shortage of good valuations,” he said. “We’re ready to start buying if coronavirus gets bad and we go into a recession.”

Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies