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12 Most Undervalued Travel Stocks To Buy According To Hedge Funds

In this piece, we will take a look at the 12 most undervalued travel stocks to buy according to hedge funds. If you want to skip our overview of the travel industry and how it’s recovering, then take a look at the 5 Most Undervalued Travel Stocks To Buy According To Hedge Funds.

After being one of the hardest hit sectors due to the coronavirus pandemic, the global travel industry is now on its path to recovery. Data from the United Nations World Tourism Organization (UNWTO) as of May 2023 shows that global travel had reached 80% of its levels during the coronavirus pandemic as of the first quarter of 2023, with 235 million people traveling globally which more than doubled the figure during the year ago quarter. Segregating the recovery geographically, the Middle East’s recovery was the strongest as travel to the region surpassed its pre-coronavirus levels. Europe was the second strongest region, as travel stood at 90% pre-Covid, while Africa and the Americas’ recovery stood at 88% and 85%, respectively.

This recovery has also wooed investors as they are starting to increase their tourism and travel investments. Data from fDi Markets and the UNWTO outlines that FDI investments in tourism grew from 286 investments in 2021 to 352 investments in 2022, with job creation growing by 23% annually. Geographically, Europe was investors’ favorite ‘destination’ for their money, as a total of 143 FDI investments were announced in the region which was worth $2.2 billion.

The recovery in tourism during the first quarter of 2023 was particularly important as it not only marked a resurgence from the bottom during the coronavirus pandemic but also from the mini shock that Europe’s travel sector in particular had faced due to the Russian invasion of Ukraine. In the aftermath of the invasion, flights to Eastern European nations dropped by as much as 69% for Moldova, with other countries such as Slovenia, Latvia, and Finland seeing air travel drop by 42%, 38%, and 36%, respectively.

Shifting gears to focus on the industry itself, the global travel industry is divided into several categories. These include business travel, medical travel, and luxury travel – with each of these sectors having their own market values and growth rates. For instance, starting from the luxury travel industry it is one of the most lucrative in the world with a market value that reaches into the trillions of dollars. Research suggests that this tourism industry subsegment was worth $1.2 trillion in 2021 and it grew to be worth $1.28 trillion by 2022 end. By 2030, the sector is expected to grow at a compounded annual growth rate (CAGR) of 7.6% to be worth $2.32 trillion, as baby boomers fork out the cash and take luxury cruise ship trips around the world in exotic destinations such as Egypt and South America.

After luxury tourism, the global medical tourism industry is also quite lucrative. Just like the broader tourism market, it also suffered heavily due to the coronavirus, with some estimates suggesting that the medical industry sector shrunk by nearly 47% due to travel restrictions. Additionally, when compared to the luxury tourism industry whose value runs into thousands of billions of dollars, the medical tourism industry is relatively smaller. Estimates show that it was worth $13.98 billion in 2021 and is slated to grow to $53.51 billion by 2028 end. Taking a brief look at some companies that drive medical tourism due to their unique technologies that are not easily available in the world, these firms include Intuitive Surgical, Inc. (NASDAQ:ISRG) whose surgical robots are among the rarest of their kind in the world, HCA Healthcare Inc. (NYSE:HCA) which runs hospitals in the U.S. and the U.K., and Cardinal Health Inc. (NYSE:CAH) whose diverse healthcare systems across Europe and North America mean that people going there for their medical needs are more likely than not to rely on a Cardinal Health facility. For more details about the medical tourism industry, you can check out Top 20 Medical Tourism Destinations in the World.

With the travel and tourism industry inextricably linked, the resurgence in global tourism is also benefiting the travel industry. According to research from Bain & Company, air travel demand will cross pre pandemic levels by 2024, but even as global demand grows, airlines will be constrained by other factors such as their CO2 emissions costs. And as is the case with other industries, Asian travel demand will grow the strongest, and might even jump by 61% as higher disposable incomes and rising living standards push more people to the skies. However, in October, airline stocks as a whole have been under pressure as high fuel prices make investors risk averse.

So, as the travel industry recovers, we decided to take a look at some top undervalued travel stocks to buy, with the notable picks being Delta Air Lines, Inc. (NYSE:DAL), Royal Caribbean Cruises Ltd. (NYSE:RCL), and Expedia Group, Inc. (NASDAQ:EXPE).

Photo by Artur Voznenko on Unsplash

Our Methodology

To compile our list of the most undervalued travel stocks to buy according to hedge funds, we first made a list of 38 companies with the greatest share price upside based on their average share price and then ranked them by the number of hedge funds that had bought the shares as of Q2 2023 end. Out of these, the top undervalued travel stocks with the highest number of hedge fund investors were chosen.

Most Undervalued Travel Stocks To Buy According To Hedge Funds

12. Southwest Airlines Co. (NYSE:LUV)

Number of Hedge Fund Investors In Q2 2023: 31

Share Price Upside: 27%

Southwest Airlines Co. (NYSE:LUV) is an American airline with more than seven hundred aircraft in its fleet. The firm has been busy shaking its management lately, as it promoted five directors to vice presidents in business divisions ranging from schedule planning to fleet management.

During this year’s second quarter, 31 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Southwest Airlines Co. (NYSE:LUV). Richard Oldfield’s Oldfield Partners is the largest shareholder out of these since it owns 2.7 million shares that are worth $99.6 million.

Southwest Airlines Co. (NYSE:LUV) joins Royal Caribbean Cruises Ltd. (NYSE:RCL), Delta Air Lines, Inc. (NYSE:DAL), and Expedia Group, Inc. (NASDAQ:EXPE) in our list of undervalued travel stocks that hedge funds are buying.

11. Tripadvisor, Inc. (NASDAQ:TRIP)

Number of Hedge Fund Investors In Q2 2023: 33

Share Price Upside: 24%

Tripadvisor, Inc. (NASDAQ:TRIP) is a travel services firm that enables users to manage and plan their trips. The firm’s stock has been under pressure lately since it is struggling with its read and better trip bookings business.

As of Q2 2023 end, 33 among the 910 hedge funds profiled by Insider Monkey were the firm’s investors. Tripadvisor, Inc. (NASDAQ:TRIP)’s largest hedge fund investor is Paul Reeder and Edward Shapiro’s PAR Capital Management as it owns $89 million worth of shares.

10. Travel + Leisure Co. (NYSE:TNL)

Number of Hedge Fund Investors In Q2 2023: 33

Share Price Upside: 50%

Travel + Leisure Co. (NYSE:TNL) is a rare travel company that provides customers with the ability to gain interests in vacation properties to use at their pleasure. Analysts have priced in a $17 share price upside based on the average share price and the average share rating is Buy.

By the end of 2023’s June quarter, 33 hedge funds out of the 910 part of Insider Monkey’s research had bought and owned Travel + Leisure Co. (NYSE:TNL)’s shares.

9. Copa Holdings, S.A. (NYSE:CPA)

Number of Hedge Fund Investors In Q2 2023: 34

Share Price Upside: 78%

Copa Holdings, S.A. (NYSE:CPA) is a Central American airline that is headquartered in Panama. It is the first stock on our list which is rated Strong Buy on average, and the average share price target of $144.31 provides it the highest percentage share price upside on our list.

As of June 2023 end, 34 out of the 910 hedge funds polled by Insider Monkey were the firm’s shareholders. Ken Griffin’s  Citadel Investment Group owns the largest stake in Copa Holdings, S.A. (NYSE:CPA) among these, which is worth $99 million.

8. American Airlines Group Inc. (NASDAQ:AAL)

Number of Hedge Fund Investors In Q2 2023: 35

Share Price Upside: 31%

American Airlines Group Inc. (NASDAQ:AAL) is one of the largest airlines in the world since it has more than nine hundred aircraft in its fleet. The firm’s third quarter earnings created some ‘turbulence’ in its shares as they initially dipped on the back of a guidance cut but then surged as rival United Airlines shared a positive earnings result.

By the end of 2023’s second quarter, 35 out of the 910 hedge funds polled by Insider Monkey had held a stake in American Airlines Group Inc. (NASDAQ:AAL). Jim Simons’ Renaissance Technologies is the biggest investor in our database, owning 17.1 million shares that are worth $306 million.

7. Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)

Number of Hedge Fund Investors In Q2 2023: 35

Share Price Upside: 49%

Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) is a cruise ship operator headquartered in Miami, Florida. After devastation during the coronavirus pandemic, the firm is doing relatively well on the financial front as it has beaten analyst EPS estimates in three of its four latest quarters.

For their second quarter of 2023 shareholdings, 35 out of the 910 hedge funds tracked by Insider Monkey had bought the cruise ship operator’s shares. Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)’s largest stakeholder out of these is John W. Rogers’s Ariel Investments since it owns $144 million worth of shares.

6. Carnival Corporation & plc (NYSE:CCL)

Number of Hedge Fund Investors In Q2 2023: 40

Share Price Upside: 51%

Carnival Corporation & plc (NYSE:CCL) is another cruise ship company. Like American Airlines, its third quarter results saw investors react negatively, as even though the firm grew its EPS and beat analyst estimates, warnings about high fuel costs made investors wary about its future.

40 out of the 910 hedge funds part of Insider Monkey’s Q2 2023 database were Carnival Corporation & plc (NYSE:CCL)’s shareholders. John Overdeck and David Siegel’s Two Sigma Advisors owns the biggest stake among these, which is worth $192 million.

Delta Air Lines, Inc. (NYSE:DAL), Carnival Corporation & plc (NYSE:CCL), Royal Caribbean Cruises Ltd. (NYSE:RCL), and Expedia Group, Inc. (NASDAQ:EXPE) are some top hedge fund undervalued travel stock picks.

Click here to continue reading and check out 5 Most Undervalued Travel Stocks To Buy According To Hedge Funds.

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Disclosure: None. 12 Most Undervalued Travel Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.

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The “Toll Booth” Operator of the AI Energy Boom

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