The economy is on its way to normalcy. After over a year of pandemic quarantines, the FDA and other agencies are preparing for recovery. The threshold for herd immunity is expected to be reached soon. That should translate to more consumers demanding more goods and services, so which are the top stock picks for recovery?
By some estimates, the overall market is considered overvalued, which means many high-flying momentum stocks will slow their ascents. As high growth stocks that led the way higher during the past year pause, what tailwinds will support recovery stocks?
While the rest of the market struggles to sustain traction, these stocks could be set for a growth trajectory when the economy recovers. This is because they service markets that were ravaged by global shutdowns. But with life heading back on track, these are five stocks that could stand to benefit.
Expedia Rebranding As Your Travel Companion
Expedia Group Inc (NASDAQ:EXPE) is a travel booking site that’s rebranding itself as a full-suite travel companion. It’s spending a massive amount on marketing to usher this new change in by informing the general population. This comes on the heels of the company’s research on what customers want from a travel company.
Consumer travel is becoming more of a conscious choice than being taken for granted. And the widespread and lengthy stay-at-home orders over the past year have many people craving travel more so than in prior years.
Expedia added 25 million travelers to its Expedia Rewards program to compete with Tripadvisor Plus. These competitive moves include a new tagline – “It Matters Who You Travel With.” All of these measures are expected to help the company reclaim its market traction.
It doesn’t hurt that the company pays a small 0.77% annual dividend yield too. As travel picks up, the company’s group of branded travel websites (which include Travelocity, Orbitz, Vrbo, trivago, and more) stand to gain from every aspect, whether you travel by land, sea, or air.
Southwest Airlines: 1st Airline To Report Profit
Southwest Airlines Co (NYSE:LUV) took a massive beating when airports shut down across the world. Booked airline flights dropped as carriers were forced to suspend 100 percent of flights during the peak of the outbreak in the spring of 2020. Worldwide flight numbers were still down by 43.5 percent year-over-year by Q1 2021.
But Southwest is offering cheap flight deals in its major hubs (based primarily in the Southwest, go figure) and became the first airline in the United States to record a post-pandemic profit.
Thanks to cost-cutting measures and $3.2 billion in government bailout funds, the company posted $116 million in profits for the first quarter of 2021.
Of course, without the bailout, it lost $1 billion in the quarter. Still, both Southwest (LUV) and its airline carrier rivals report demand for air travel is on the rise.
As vaccines continue rolling out to more of the population, consumers are more willing to travel by plane. This was a big concern for many, as the enclosed spaces and crowded nature of an airplane make it a perceived infection hotspot.
Southwest has aggressively advertised safety considerations over the past year. This includes the company’s use of Boeing 737 Max jets, which were the center of controversy in the years leading up to the travel restrictions. The company even doubled down and ordered 100 more Boeing 737 Max planes in the first quarter of 2021.
This helped the company’s stock recover to former share price levels, and its 1.17 percent annual dividend yield adds a sweetener for dividend investors. Expect to see Southwest to continue its growth until it hits a cruising altitude for the remainder of the decade if its financials continue to trend well.
Yum Brands Digital Strategy Is Proven Winner
Yum! Brands, Inc. (NYSE:YUM) stock took a hit in the beginning stages of the pandemic as municipal lockdowns spread across the globe. But its restaurants (including Taco Bell, KFC, Pizza Hut) were already set up for drive-through service and digital ordering.
And the pandemic forced management to expand the company’s digital footprint. Yum increased its geolocation capabilities using Foursquare and bought new technology to expand its online ordering capability.
It also spent $375 million to buy out The Habit Burger Grill. This west coast fast-casual concept restaurant is the first burger chain the company’s portfolio.
The buyout in the first quarter of 2021 will likely suppress the company’s price by up to three percent by some analysts’ estimates. It is due to report the losses and need to pay them off, and that could present an attractive opportunity for those seeking a “stock on sale” to buy for the recovery.
The most optimistic analysts believe that YUM share price has a potential 20-percent upside, and its 1.70-percent annual dividend yield will attract those seeking liquidity. It consistently paid its quarterly cash payments, in spite of the pandemic causing serious problems for the entire restaurant industry.
Revenues should grow as the brand portfolio expands, and people start traveling and commuting more. And its investment in Israeli omnichannel marketing and ordering company Tictuk Technologies should allow customers to order through social media channels and more.
This gives the company a broad strategy that should succeed regardless of which direction the economy recovers.
Disney Golden Goose Is Its Streaming Platform
Walt Disney Co (NYSE:DIS) Investors were seriously concerned for some time as theme parks shut around the world and sports came to a screeching halt which had a knock on effect to ESPN, a division of the company.
But under its corporate umbrella was a golden ticket, the digital Disney Plus service surpassed 100 million subscribers and has proven to be a huge success.
The company leveraged its broad audience base to launch new content and even caused controversy when it bypassed theaters to release big-name movies like Soul and Mulan.
But this is just one part of Disney’s overall revenue – its licensing, cruises, and theme parks are on their way to reopening. Production studios and sets are back up and running too, which means it can clear out its backed-up content pipeline and continue generating profits.
Of course, it won’t be an easy path to recovery. California and Florida have completely different rules regarding public spaces, and it will need to navigate a lot of red tape over the next year.
Nevertheless, Disney’s streaming, licensing, and other revenue streams should more than make up for the problems though, as the company continues posting higher profits.
Royal Caribbean Cruises Sets Sail Internationally
Royal Caribbean Cruises Ltd (NYSE:RCL) and other cruise lines are fighting the U.S. Centers for Disease Control (CDC) about its conditional sailing order. The country is hesitant to restart cruising activities, and that leaves these companies without a clear timeline for when they can resume full operations.
However, Royal Caribbean is among the cruise lines restarting its cruises in other parts of the world, including Israel, the United Kingdom, and the Caribbean. These cruise lines are the lifeblood for hundreds to thousands of cruise excursion companies that completely dried up as COVID-19 travel restrictions hit.
And some employees are hesitant to return to the job after being stranded for nearly a year out at sea due to dock closures. But with cruise lines beginning to set sail, Royal Caribbean is still trading below its pre-pandemic price levels. This posts an attractive opportunity for investors looking to gain from its eventual return to normalcy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.