Ah, the summer months. Since it’s winter in Canada for approximately 10.5 months per year (author’s estimate, your experience may vary), I like to get out and enjoy the nice weather. I’m currently writing this from a very comfy patio chair while sipping a soda. Life is pretty sweet.
Millions of Canadians take this one step farther, and end up heading somewhere on summer holidays. Our nation has some truly remarkable tourist sights. The history of Quebec is endlessly fascinating. The grandeur of Niagara Falls is amazing. The Rocky Mountains are breathtaking. Even my hometown of Drumheller, Alberta has some pretty cool dinosaur skeletons.
But what if you could get paid to go on summer vacation? OK, nobody is going to directly pay you, unless you’re a travel blogger or the winner of The Amazing Race Canada. But it’s easy to indirectly get paid, by owning stocks that cater directly to travelers of all kinds.
Tourism is booming, even during these tepid economic times. Traveling is viewed as the new leisure activity that all the cool kids are doing. Instead of acquiring things, we’re much more interested in the bragging rights associated with visiting far-flung corners of the planet.
Here are three ways for Canadian investors to play that trend.
Shares in Bombardier (TSX: BBD.B) have underperformed over the last year, thanks to delays of its long awaited CSeries line of business jets. The company originally said delivery of the jets would be before the end of 2014, but has since pushed back the target to sometime in late 2015.
Chances are that most investors have taken a Bombardier plane at some point in their lives. Both of Canada’s major airlines use them, as well as many other airlines around the world. The current offerings are perfect for regional flights or for longer routes without much demand.
Bombardier is also a major supplier of train cars, especially for North American subway systems. The company’s cars can be found transporting folks around in New York, San Francisco, Las Vegas, and Toronto, just to name a few cities. It’s very possible that you might take a Bombardier plane to your destination and then ride a Bombardier subway car to get around.
The most obvious way for investors to invest in travel is to buy shares in Canada’s two major airlines, Air Canada (TSX: AC.B) and WestJet (TSX: WJA).
WestJet has long been an investor favourite. The company is consistently profitable, even during tough times. It doesn’t have unions increasing its labour costs, and management is terrific at keeping costs down and employee morale high. I choose WestJet whenever I’m flying anywhere it serves. The company also pays a 1.75% dividend, which is rare in the world of airlines.
But investors shouldn’t count out Air Canada. The company has the international exposure, and the delivery of several new Boeing Dreamliner jets should open up routes that don’t quite have the demand for a larger plane, like a 747. Asia is primed to be a growth market going forward, thanks to all the recent immigration from that part of the world to Canada.
Additionally, Air Canada has hammered its unions hard, getting significant cost reductions. This might not be good for employee morale, but it’s good for the bottom line. After flirting with bankruptcy in 2012, the company actually made a small profit in 2013, and analysts are expecting a profit of $1.52 per share in 2014, putting the shares at just six times forward earnings.
Billionaire investor Warren Buffett has often been bearish on airlines. But in today’s world of dynamic pricing, better fuel management, and lower costs, perhaps the Oracle of Omaha is wrong about that, and the airlines could be good investments. They sure have been over the last year, anyway.
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