Hedge Funds Booking 3 Rallying Tourism Stocks as International Travel Soars

Hedge Funds Booking 3 Rallying Tourism Stocks as International Travel Soars

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The United Nations World Tourism Organization (UNWTO) expects this year’s international travel figures to surpass 2012’s record-breaking one billion (plus a bit more) international tourists. In the June issue of its World Tourism Barometer, the UNWTO reported international travel grew by 4.3% during the first four months of 2013 compared to the same period last year. From January to April, 298 million tourists traveled abroad versus 286 million in 2012. The Asia-Pacific region experienced the highest relative growth at 6%, followed by 5% in Europe and an unconfirmed 5% in the Middle East, with Africa’s 2% and the Americas’ 1% increase rounding out the list.

Europe and the Asia-Pacific region’s prominence in international travel helped boost Priceline’s (PCLN) second quarter earnings this year. Since acquiring Amsterdam-based Bookings.com in 2005 and Singapore-headquartered Agoda in 2007, Priceline has amplified its presence in Europe and the Asia-Pacific region. Last week, the online travel agent reported revenue of $1.68 billion, up 27% from last year’s $1.33 billion and exceeding the Bloomberg’s average analyst estimate of $1.66 billion. International gross bookings grew by 44% during the quarter, which  CEO Jeffrey Boyd attributed to “good results in Europe and continued high growth rates in Asia-Pacific and the Americas.”

Another record year on the books?

The UNWTO forecasts a 3-4% increase in international tourist arrivals this year. In a July press release, the organization announced that it expects an estimated 435 million tourists expected to go abroad between May and August. If the UNWTO’s peak season projection is met, it will bring 2013’s international tourist arrivals total to an unprecedented 733 million. This will reflect a 4.0%, or 28 million increase in arrivals, from end of August in 2012. Remember, international tourism reached historic highs in 2012, with over one billion tourists and receipts totaling an estimated $1.075 trillion.

Investing ideas

Between now and 2020, the UNWTO expects international tourism to grow by an annual rate of 3.8%. The rate of the industry’s continued expansion as well as Priceline’s better than expected sales inspired us to seek travel and tourism stocks with strong upside potential.

To begin, we constructed a universe comprised of stocks from the Dow Jones Travel & Tourism Index, lodging industry, and resorts and casinos industry. Next, we screened for stocks with bullish sentiment from institutional investors, which is reflected in significant net institutional purchases over the last quarter representing at least 5% of share float. These purchases indicate that institutional investors, such as hedge fund managers and mutual fund managers, expect these stocks to outperform into the future.

We further narrowed down our list by screening for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages (MA). This indicates that these stocks have strong upward momentum.

We were left with three stocks on our list.

Click on the image below to see sales data over time. Quarterly sales data sourced from Zacks Investment Research.

Do you think these stocks are well-positioned to capitalize on the growth in international tourism? Use this list as a starting point for your own analysis.

1. Travelzoo Inc. (TZOO, Earnings, Analysts, Financials): An Internet media company that publishes travel and entertainment offers from various travel and entertainment companies in North America and Europe.

Market cap at $459.48M, most recent closing price at $30.16.

Net institutional purchases in the current quarter at 938.7K shares, which represents about 12.22% of the company's float of 7.68M shares. The top holders of the stock are Bares Capital Management Inc and BlackRock Institutional Trust Company, N.A.

The stock is currently rallying 0.79% above its 20-day MA, 5.10% above its 50-day MA, and 30.08% above its 200-day MA.

2. Boyd Gaming Corp. (BYD, Earnings, Analysts, Financials): Operates as a multi-jurisdictional gaming company in the United States.

Market cap at $1.09B, most recent closing price at $12.19.

Net institutional purchases in the current quarter at 5.7M shares, which represents about 11.96% of the company's float of 47.67M shares. The top holders of the stock are PAR Capital Management, Inc. and H Partners Management, LLC.

The stock is currently rallying 1.27% above its 20-day MA, 2.26% above its 50-day MA, and 37.16% above its 200-day MA.

3. Orbitz Worldwide, Inc. (OWW, Earnings, Analysts, Financials): Operates as an online travel company worldwide.

Market cap at $1.34B, most recent closing price at $12.62.

Net institutional purchases in the current quarter at 5.2M shares, which represents about 17.03% of the company's float of 30.53M shares. The top holders of the stock are Blackstone Group L.P. and PAR Capital Management, Inc.

The stock is currently rallying 16.96% above its 20-day MA, 30.39% above its 50-day MA, and 115.83% above its 200-day MA.



(List compiled by Mary-Lynn Cesar. Institutional data sourced from Fidelity. All other data sourced from Finviz.)


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