In this article, we will take a look at the 5 most undervalued travel stocks to buy according to hedge funds. To see more such companies, go directly to 12 Most Undervalued Travel Stocks To Buy According To Hedge Funds.
5. Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH)
Number of Hedge Fund Holders: 38
PE Ratio as of January 27: 11.81
Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) bulls believe the company could gain in 2023 and beyond amid a huge rise in demand as travelers across the world continue to spend on leisure despite tough market conditions.
Earlier in January, NCL Corporation, a subsidiary of Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH), said it will sell about $500 million of its senior secured notes due 2028 in a private offering. Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) said net proceeds will be used to repay a portion of the term loans outstanding under senior secured credit facility that will become due in January 2024.
Investment firm Truist in a note published earlier in January said cruise stocks, including Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH), are “finally starting to participate in their fair share of the travel recovery.”
4. Royal Caribbean Cruises Ltd. (NYSE:RCL)
Number of Hedge Fund Holders: 42
PE Ratio as of January 27: 14.43
Royal Caribbean Cruises Ltd. (NYSE:RCL) received bullish comments from Truist earlier this month. The firm’s analyst C. Patrick Scholes said that Royal Caribbean Cruises Ltd. (NYSE:RCL), among other cruise stocks, is finally benefitting from the recovery in the industry. The analyst said that cruise stocks are expected to benefit further from the travel demand in 2023, citing his channel checks. The analyst said his checks point to a 50% jump in industry-wide sales as compared to the same period in 2019. The analyst sees a “sense of urgency” in booking trends.
Perhaps that’s why hedge funds are beginning to load up on Royal Caribbean Cruises Ltd. (NYSE:RCL). As of the end of the third quarter, 42 hedge funds reported having stakes in Royal Caribbean Cruises Ltd. (NYSE:RCL), compared to 28 funds in the previous quarter. This shows a huge spike in hedge fund sentiment for Royal Caribbean Cruises Ltd. (NYSE:RCL).
3. Delta Air Lines, Inc. (NYSE:DAL)
Number of Hedge Fund Holders: 53
PE Ratio as of January 27: 19.07
Delta Air Lines, Inc. (NYSE:DAL) is among the most undervalued travel stocks to buy according to hedge funds. Of the 920 hedge funds in Insider Monkey’s database, 52 hedge funds had stakes in Delta as of the end of the third quarter, up from 49 hedge funds from the previous quarter. The total worth of these stakes was $1.3 billion.
Earlier in January, Morgan Stanley analyst Ravi Shanker gave bullish comments on Delta Air Lines, Inc. (NYSE:DAL). The analyst said that the “coast is clear” for Delta to “do what it does best… fly a leading airline franchise on the way to earning $7 EPS.”
The analyst believes Delta Air Lines, Inc. (NYSE:DAL) is in a strong position to take advantage of the strong demand in the travel industry. Referring to the soft Q1 guidance by Delta Air Lines, Inc. (NYSE:DAL), Shanker said it was the result of “idiosyncratic quirks” on the timing of costs.
2. Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 76
PE Ratio as of January 27: 13.76
Expedia Group, Inc. (NASDAQ:EXPE) is one of the most notable players in the online travel space. In December, Goldman Sachs added Expedia Group, Inc. (NASDAQ:EXPE) in its list of stocks that are exposed to the travel theme in 2023. Expedia Group, Inc. (NASDAQ:EXPE) said in a note to investors that amid the post-pandemic travel rebound, the evolution in the travel industry involves “taking more of the consumer wallet per trip” and marketing leverage. The firm says Expedia Group, Inc. (NASDAQ:EXPE) is one of the top players most exposed to this theme
A total of 76 hedge funds tracked by Insider Monkey had stakes in Expedia Group, Inc. (NASDAQ:EXPE) as of the end of the third quarter. The total value of these stakes was $2.9 billion. The biggest stakeholder of Expedia Group, Inc. (NASDAQ:EXPE) was PAR Capital Management managed by Paul Reeder and Edward Shapiro.
Here is what Miller Value Partners specifically said about Expedia Group, Inc. (NASDAQ:EXPE) in its Q3 2022 investor letter:
“Expedia Group, Inc. (NASDAQ:EXPE) ($92.69) has a high teens free cash flow yield, trades at 14x 2022 and 10x 2023 earnings. We believe it can sustain earnings per share growth in the mid-teens. It massively improved its business and margins during the pandemic, has repaired its balance sheet and is chaired by an amazing capital allocator, Barry Diller. We think it’s worth more than double the current price.”
1. Booking Holdings Inc. (NASDAQ:BKNG)
Number of Hedge Fund Holders: 92
PE Ratio as of January 27: 20.33
As of January 27, Booking Holdings Inc. (NASDAQ:BKNG) has a forward PE ratio of 20.33. Even though the metric slightly crosses our threshold of 20 for the PE ratio metric, we are still including Booking Holdings Inc. (NASDAQ:BKNG) in our list because it is one of the top players in the travel industry and is among the favorite travel stocks of elite hedge funds in America. Of the 920 hedge funds tracked by Insider Monkey, 92 hedge funds reported owning stakes in Booking Holdings Inc. (NASDAQ:BKNG). The total worth of these stakes was $5.6 billion. The biggest stakeholder of Booking Holdings Inc. (NASDAQ:BKNG) was Natixis Global Asset Management’s Harris Associates, which owns an $883 million stake in the company.
Here is what L1 Capital International Fund has to say about Booking Holdings Inc. (NASDAQ:BKNG) in its Q3 2022 investor letter:
“During the December 2022 Quarter over 50% of the Fund’s holdings’ share prices increased by more than 10% in local currency with a number of them increasing by more than 20%. Five companies positively contributed over 0.5% (in AUD) to the Fund’s returns for the quarter. We added to our investment in Booking Holdings Inc. (NASDAQ:BKNG) prior to Q3 2022 results due to the share price overly discounting concerns about near term travel activity. Booking’s quarterly results were a standout, with the recovery in the travel industry following COVID-19 disruptions running well ahead of our expectations. Booking’s share price subsequently increased 23% in the December 2022 Quarter and has increased a further 14% so far in 2023 (in USD).”
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