3 Travel Stocks to Consider Buying

If the market bottoms soon, Expedia Inc (EXPE), Priceline Group Inc (PCLN), and JetBlue Airways Corporation (JBLU) could post outsized returns

by Alex Eppstein

Published on Jan 20, 2016 at 11:47 AM
Updated on Jun 24, 2020 at 10:16 AM

This morning, Schaeffer's Senior Quantitative Analyst Rocky White published a study on the best stocks to own after a pullback. It's worth a full read, but two key observations he made based on historical data were:

  1. The stocks that pull back the most tend to bounce more strongly after a bottom; and
  2. This is especially true for stocks that remain positive year-over-year after the pullback.

According to these parameters, the travel sector may be worth a second look. Among the stocks that made White's list are online travel issues Expedia Inc (NASDAQ:EXPE) and Priceline Group Inc (NASDAQ:PCLN), and airline JetBlue Airways Corporation (NASDAQ:JBLU). Below, we'll take a closer look at this trio of potential outperformers.

Heading into today's session, EXPE had pulled back nearly 25% from its November highs, and is now another 2.8% lower at $102.34. However, year-over-year, the stock's advance remains at a healthy 21.1%, with the shares testing support at their 80-week moving average -- which hasn't been breached on a closing basis since October 2013.

If Expedia Inc does stage an outsized comeback, there's plenty of negativity to be unwound in the options pits. Specifically, traders have bought to open triple the number of puts as calls during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The corresponding put/call volume ratio of 3.21 ranks in the 94th annual percentile. A mass exodus among these skeptics could create fresh tailwinds for EXPE.

Rival PCLN has lost over 28% since the market peaked in November, down 3.5% today at $1,055.87. However, the shares remain slightly higher on a year-over-year basis. Amid the stock's pullback, short-term option traders have been extremely focused on puts. Specifically, Priceline Group Inc's Schaeffer's put/call open interest ratio (SOIR) checks in at an annual high of 1.34, with puts outstripping calls among options with a shelf-life of three months or less. From a contrarian perspective, a capitulation among doubters could contribute to outsized gains for the shares.

Finally, JBLU is down 0.7% at $20.13, and has shed nearly one-quarter of its value since the market's early November highs. However, the stock still boasts a year-over-year lead of nearly 32%, and could consolidate into its 80-week moving average, which hasn't been tested since late 2012.

There's plenty of cash on the sideline to help JetBlue Airways Corporation recover from the pullback, too. During the last reporting period, short interest spiked 8.5% to 21.5 million shares. If short sellers decide to buy back these positions, it would take them approximately one week to cover, based on JBLU's average daily volumes.


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