The state of Hawaii has long been a popular tourist destination for both Americans and international travelers. Despite its ranking as the 41st most populous state in the 2010 U.S. Census, Hawaii sees millions of passengers each year. The state, which had a population of 1.39 million people in 2012, has seen flights and cruise ship arrivals grow in 2013.
Through the month of April, the state of Hawaii had 637,000 visitors by air, which is a 5.8% increase from the prior year. Of that growth, international visitors increased 9.1%, while domestic visitors grew 4.2%. That traffic could also increase with several new countries expanding flights to the Honolulu International Airport within the next 12 months.
Another reason for the increase in tourism could be the newly opened Aulani Disney Resort & Spa. Opened in August 2011, the newest American The Walt Disney Company (NYSE:DIS) resort is still undergoing expansion to get to full capacity. The resort has 359 hotel rooms and 481 Disney Vacation Club Villas. Located only 17 miles from the Honolulu International Airport, the resort is attracting visitors from all over the world.
Here are three large publicly traded Hawaiian companies worth putting in your portfolio to profit from the continued tourism and population growth of the island state.
Invest in a utility and a bank
Hawaiian Electric Industries, Inc. (NYSE:HE) offers the unique investment opportunity of an electric company and a regional bank. I wrote about the diversified businesses of Hawaiian Electric back in February of 2012. The company operates two utility companies, which make up 95% of the state’s electricity, and a regional bank, which ranks in the top five in assets and deposits for the state.
Founded in 1891, Hawaiian Electric Industries, Inc. (NYSE:HE) has provided electricity for every island but Kauai. The company is increasing its clean energy and posted a record 13.9% of its energy from renewable resources in 2012. Electric revenue made up $719.2 million of the $784 million reported in the company’s first quarter.
American Savings Bank opened in 1925 and ranks in the top five for Hawaiian banking assets. In the first quarter, bank deposits grew by $83 million to $4.3 billion. Loan growth also grew 6.9% in the first quarter. Total revenue did decline in fiscal 2012 for the banking sector, but it looks like a rebound is on the way in 2013 with strong loan activity.
Hawaiian Electric Industries, Inc. (NYSE:HE) has paid a dividend for the last 111 years and currently yields close to 5%, offering investors great annual income along with the island’s growth. Shares of Hawaiian Electric Industries, Inc. (NYSE:HE) were down 3.7% in 2012. Look for shares to rebound with increased loan activity and increased electric infrastructure investments.
Invest in banking duopoly
The Bank of Hawaii Corporation (NYSE:BOH) is one of the two largest banks representing the island state. In 2012, Bank of Hawaii and First Hawaiian Bank had a 71% market share in the state. Increasing barriers of entry make it hard for others to enter the state. None of the largest ten national banks have a physical presence on the island.
In the first quarter, Bank of Hawaii Corporation (NYSE:BOH) reported net income of $36 million, or $0.81 per share. This was a decrease from the previous year, but did come as deposits for both consumers and businesses trended upward. The bank has assets of $13.53 billion and saw its book share rise at the end of 2012.
Shares of Bank of Hawaii Corporation (NYSE:BOH) were down 2.3% in 2012. This drop in share price came despite an improving Hawaiian economy. Housing sales continue to track up, as do tourists who need to make banking transactions. This stock pays a dividend of around 3.7% and offers a chance to invest in a large share of the state’s banking presence.
Hawaii through the air
My favorite play on the Hawaiian economy is small cap Hawaiian Holdings, Inc. (NASDAQ:HA). Similar to the large barriers of entry of large banks to enter the state, large airlines face high infrastructure costs in the state. This is why Hawaiian Holdings has been able to be one of the largest airlines on the island and continues to expand its services domestically and internationally.
As the state’s biggest and longest serving airline, Hawaiian Holdings, Inc. (NASDAQ:HA) provides service to the United States, Philippines, Australia, American Samoa, Tahiti, South Korea, and New Zealand. The airline also provides over 150 daily flights between the Hawaiian Islands for residents and tourists.
In fiscal 2012, Hawaiian Holdings, Inc. (NASDAQ:HA) posted earnings per share of $1.01. The company saw total revenue increase 18.9%. This came from a 19.3% increase in passenger revenue and 15% in other revenue. Analysts expect the company to earn $0.88 in fiscal 2013 and once again post earnings over $1.00 in fiscal 2014. This makes shares an extreme bargain, with a price to earnings of under 10 times current fiscal year earnings and less than six times next year’s earnings.
The best growth news for the company comes from new destinations and new aircraft. Hawaiian Holdings added flights to New Zealand in March and has planned flights to Japan beginning June 25 and Taiwan beginning July 9. The biggest news centers around Beijing, China, where Hawaiian Holdings, Inc. (NASDAQ:HA) will begin flying 294 passengers three times a week beginning in April next year.
Hawaiian Holdings added eight long haul aircrafts in 2012 and also opened a new hub in Maui. In 2013, the company will take delivery of five Airbus A330-220 aircrafts. In January, the company announced a purchase order for 16 Airbus that will be delivered between 2017 and 2020.
In 2012, shares of Hawaiian Holdings were up 13.7%. Shares now trade in the middle of their 52-week range. Shares are still down over 10% in the last five years despite strong growth and increased passenger loads. However, that is about to change with new international destinations and an improved aircraft base coming. This might be the perfect Hawaiian stock to put in your portfolio.
Conclusion
While many investors are trying to beat the stock market with top growth plays and the best national companies, consider taking a more regional approach. As mentioned above, these companies share near monopolies in the state of Hawaii. If you believe Hawaii will continue to grow through tourism and population shifts, consider buying any of these three stocks. My favorite is Hawaiian Holdings, Inc. (NASDAQ:HA) due to impending catalysts from new regional flights.
Chris Katje has no position in any stocks mentioned. The Motley Fool owns shares of Bank of Hawaii.
The article Say Aloha to These Hawaiian Stocks originally appeared on Fool.com.
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