We recently published a list of 12 Best Airport Stocks to Invest in Now. In this article, we are going to take a look at where Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) stands against other best airport stocks to invest in now.
Prior to the pandemic, the travel and tourism industry contributed 10.4% of GDP (US$10.3 trillion) and 10.5% of all jobs (334 million), making it a vital sector of the global economy. The industry’s contribution to global GDP in 2023 was 9.1%, up 23.2% from 2022 and just 4.1% below 2019 levels, according to WTTC‘s most recent research. Domestic visitor expenditure increased by 18.1%, surpassing 2019 levels, while employment increased by 27 million jobs, a 9.1% year-over-year gain. Spending by foreign visitors increased by 33.1%, but it was still 14.4% less than before the outbreak.
Julia Simpson, WTTC President & CEO, on April 2024, stated:
“The future is very bright. We can predict a record-breaking 2024. The sector’s global economic contribution is set to reach an all-time high of $11.1 trillion, which will generate one in every ten dollars worldwide. The sector is also expected to support nearly 348 million jobs, an increase of 13.6 million jobs on its 2019 record. We trust that our data will support policymakers, industry professionals and individuals engaged in the evolution of travel.”
According to Fortune Business Insights, in 2024, the size of the global market for airport services was valued at $196.96 billion. The market is expected to increase at a compound annual growth rate of 14.4% from $222.26 billion in 2025 to $570.12 billion by 2032. In 2024, North America held a 28.98% market share, dominating the airport services industry. Furthermore, it is projected that the airport services market in the United States will expand considerably, reaching an estimated value of $130.37 billion by 2032. This growth will be fueled by a rise in air and passenger traffic as well as cargo transportation.
According to S&P’s report, the worldwide travel retail sector is expected to expand by 7%-10% between 2024 and 2025, greatly above the 3.3% and 3.2% growth in the global GDP in 2024 and 2025, respectively. Sales won’t approach 2019 levels until 2025, but air traffic will surpass pre-pandemic levels in 2024. Growth will be driven by Asia-Pacific, helped by better infrastructure and a growing middle class. Duty-free shopping, however, might be slowed by declining consumer confidence and fewer business tourists.
As per the aforementioned report, over the next two to four years, it is anticipated that global air traffic will increase more quickly than GDP due to growing middle classes in Asia-Pacific and, to a lesser extent, Latin America, as well as better infrastructure and connectivity. By incorporating technology, personalization, and hybrid stores that blend duty-free shopping with dining options and entertainment, travel businesses are adjusting. Customer experiences are also being improved by a move toward luxury items, fashion, electronics, and regional merchandise. More passenger time will be available for shopping because of increased digitization, remote check-in, and bag-drop services. However, sector profits are under pressure from growing airport concession fees, which have leveled off at higher levels since the pandemic. Chinese operators have secured reduced concession rates, giving them a competitive edge, even though the majority of travel shops would see a rise in expenses.
Looking ahead, according to Deloitte’s report, in 2025, travel demand is projected to be high due to post-pandemic lifestyle changes, greater freedom in working remotely, and a promising economic outlook. TSA throughput climbed by 7% year over year between December 20 and January 5 as a result of US tourists planning longer and more costly travels during the recent winter holiday season. A post-pandemic reprioritization, with 40% of travelers raising their holiday budgets because travel has become more important, and the growing trend of “laptop lugging,” where half of passengers want to work remotely while traveling, are important factors. Travel expenditure was also supported by the fact that the percentage of Americans who reported an improved financial situation jumped from 31% to 37%. Travel agencies need to adjust to new AI applications, changing global travel patterns, increased service offerings, and possible regulatory changes under a new administration to meet this demand.
A daytime aerial view of an airport bustling with planes and staff.
Methodology
We sifted through holdings of airport services ETFs and online rankings to form an initial list of 20 airport stocks. From the resultant dataset, we chose 12 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 900 hedge funds in Q3 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s market capitalization as of February 12 for stocks that are trading under OTC.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB)
Number of Hedge Fund Holders: 9
A major participant in Mexico’s airport industry, Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) presents an appealing investment opportunity because of its monopoly-like position, steady double-digit earnings growth, and outstanding shareholder returns. Since becoming public in 2006, OMAB has operated 13 airports, with a portfolio that includes major hubs, popular tourist attractions, and smaller cities throughout northern Mexico. The company has a track record of generating a 16.8% annual total return. These airports are essential to the Mexican economy because they give investors access to a crucial component of the infrastructure that supports trade and tourism in the whole country.
The company’s growth possibilities are related to the Master Development Program (MDP), which requires it to provide traffic forecasts, capital investment plans, and maintenance projections every five years. The business can increase the fees it charges airlines and passengers in return for this investment, which offers a clear way to increase revenue. Inflation and rising demand for airport services are expected to result in higher charges under the next MDP, which is scheduled to go into force in 2026. Since air traffic has grown historically and Monterrey Airport is expected to become a regional hub, Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB)’s revenue base should rise more quickly than traffic alone.
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) is in a unique position in the airport business due to its monopoly-like operations, which are supported by advantageous government contracts. Since the firm has no direct rivals for the airports it oversees, it has considerable pricing power in contrast to airlines, which are subject to fierce competition. Additionally, the business performs well in both prosperous and struggling times due to its capacity to increase costs in accordance with inflation without alienating clients. It maintained favorable returns despite the difficulties of 2020, proving the strength of its business strategy.
Jim Simons’s Renaissance Technologies was the largest stakeholder in the company from among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 211,700 shares worth $14.36 million as of Q3.
Middle Coast Investing stated the following regarding Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) in its Q3 2024 investor letter:
“We added meaningfully to our Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) (Central North Airport Group in Mexico) position. A year ago, shares of this and PAC (Pacific Airport Group) plunged on government regulation concerns, but also a hurricane hitting Acapulco (OMAB runs the airport) and plane engine issues for the major Mexican airline, Volaris.
We start to lap those issues in October and November, meaning comparisons get easier for the business. Mexico also has a new president, Claudia Sheinbaum. She is from the same political party, and that party has a supermajority and is ramming through a controversial judicial reform. But I expect her to be less contentious and more technocratic than her predecessor, Andreas Manuel Lopez Obrador (AMLO) [3]. And PAC recently announced (PDF) its new Master Development Plan approved by the government, and while it calls for a lot of investment, it also has healthy tariff increases built in. I don’t think the government is “coming” for the airport businesses, and the share prices are more than reasonable.”
Overall, OMAB ranks 4th on our list of Best Airport Stocks to Invest in Now. While we acknowledge the potential for OMAB to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than OMAB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.