December 3, 2022

Alex o'Loughlin

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Trio of ETFs for Hot Summer Travel

It’s Memorial Day Weekend and with that arrives the official start of the summer travel season. However, the 2022 summer travel season could be unique – to put things delicately – relative to predecessors.

With the exception of airlines, travel and leisure stocks mostly reside in the consumer discretionary sector – one of this year’s worst-performing groups. While that sector’s struggles aren’t entirely attributable to travel and leisure equities the latter isn’t helped by the former flailing.

“Many consumers are still hesitant to spend on travel and entertainment—given lingering threats from COVID variants,” according to Fidelity.

Additionally, soaring gas prices and the surging Consumer Price index (CPI) could weigh on summer travel. On the other handle, travel exchange traded funds could be worth considering in the coming months because there’s still semblance of pent-up demand for travel.

“The pandemic has instilled in most people a greater appreciation for travel, and that’s reflected in the plans Americans are making to get out and about this summer,” said AHLA CEO and president Chip Rogers in a statement. “But just as COVID’s negative impact on travel is starting to wane, a new set of challenges is emerging in the form of historic inflation and record high gas prices.” 

With that in mind, here are some travel ETFs to consider.

ALPS Global Travel Beneficiaries ETF (JRNY)

The ALPS Global Travel Beneficiaries ETF (JRNY) tracks the S-Network Global Travel Index and is one of the more diverse ETFs in the travel and leisure category.

JRNY offers investors broad reach into the travel ecosystem, featuring exposure to airlines, cruise operators, gaming companies and luxury retails. That last segment is one Fidelity is bullish on with the consumer cyclical space. As for summer travel ETF credentials, JRNY has those, too.

“Many companies are now forecasting record travel demand this summer with implications that the long-awaited ‘reopening trade’ has arrived—but travel stocks have not yet reflected this sentiment, even as many companies reported earnings beats this quarter,” wrote Alerian analyst Roxanna Islam.

VanEck Vectors Gaming ETF (BJK)

The VanEck Vectors Gaming ETF (BJK) is the original ETF dedicated to casino equities, but it’s evolving with the times and now includes ample exposure to the burgeoning iGaming and sports wagering segments.

Still, BJK maintains robust exposure to traditional land-based casinos, making it one of the more relevant considerations in travel ETF conversation. BJK is also a surprising home to strong shareholder rewards trends.

“More gaming stocks announced buyback plans in the past nine months than in any comparable period in 10+ years,” says Roth Capital analyst Edward Engel in a note to clients today. “Among US-listed companies, 12 gaming operators/suppliers authorized repurchase plans since August 2021, including a flurry of announcements this month.”

U.S. Global Jets ETF (JETS)

The U.S. Global Jets ETF (JETS) is one of the elder statesmen of travel ETFs and rejuvenated the idea of investing in a basket of airline equities. It’s also a potential tell on how investors are feeling about the broader economy.

While that outlook remains to be decided, there are some green shoots emerging for JETS components and more could mount with strong summer travel trends.

“The airline has a bullish outlook on the future — bolstered by this persistent strength of demand and the fact that it is nearing 2019 operating margins — and once again reiterated confidence in its longer-term United Next targets of adjusted pretax margin of approximately 9% in 2023 and about 14% in 2026,” United said in a release. “This confidence is underpinned by the company’s current expectation to report a profit for the full year 2022.”

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.