Markets
The Hardest Hit Companies of the COVID-19 Downturn: The ‘BEACH’ Stocks
BEACH Stocks: $332B in Value Washed Away
The market’s latest storm has plunged the global travel industry into uncharted territory.
Since the S&P 500 market high on February 19, 2020, market capitalizations across BEACH industries—booking, entertainment, airlines, cruises, and hotels—have tumbled. The global airline industry alone has seen $157B wiped off valuations across 116 publicly traded airlines.
Investor confidence in cruise lines has also dropped. Between Carnival, Royal Caribbean, and Norwegian Cruise Line Holdings, over half of their market value has evaporated—equal to at least $42B in combined market capitalization.
Today’s infographic profiles the steep losses across BEACH companies. It looks at the ripple effects across individual companies and industries from the February 19 peak to date*.
*All numbers as of market close on March 24, 2020
Falling Off A Cliff
As the COVID-19 pandemic has spread to over 100 countries, many governments have implemented sweeping travel restrictions.
The impact across BEACH industries is far-reaching, with some valuations declining to nearly a quarter of their previous total.
Company | Ticker | Category | Market Cap: 02/19/2020 | Market Cap: 03/24/2020 | % Change |
---|---|---|---|---|---|
Booking Holdings | BKNG | Booking | $80.8B | $51B | -37% |
Expedia Group | EXPE | Booking | $17.1B | $8.1B | -53% |
Allegiant Travel | ALGT | Booking | $2.7B | $1.4B | -47% |
Live Nation | LYV | Entertainment & Live Events | $16.3B | $9.1B | -44% |
Six Flags | SIX | Entertainment & Live Events | $3.2B | $1.1B | -66% |
Cedar Fair | FUN | Entertainment & Live Events | $3.1B | $1.3B | -58% |
The Walt Disney Co | DIS | Entertainment & Live Events | $255.1B | $177B | -31% |
Penn National Gaming | PENN | Entertainment & Live Events | $4.3B | $1.6B | -63% |
Delta Air Lines | DAL | Airlines | $37.5B | $17.8B | -52% |
United Airlines | UAL | Airlines | $19.7B | $8.4B | -57% |
American Airlines | AAL | Airlines | $12.1B | $6.1B | -50% |
Southwest Airlines | LUV | Airlines | $29.5B | $19.7B | -33% |
Alaska Air Group | ALK | Airlines | $8B | $3.7B | -54% |
Air Canada (in USD) | AC | Airlines | $8.3B | $2.8B | -67% |
Carnival | CCL | Cruise & Casino | $30.8B | $10B | -67% |
Royal Caribbean Cruises | RCL | Cruise & Casino | $23.2B | $7.5B | -68% |
Norwegian Cruise Lines | NCLH | Cruise & Casino | $11.1B | $3.1B | -72% |
Las Vegas Sands | LVS | Cruise & Casino | $52.8B | $35.1B | -34% |
MGM Resorts International | MGM | Cruise & Casino | $16.2B | $6.2B | -68% |
Wynn Resorts | WYNN | Cruise & Casino | $14.6B | $7.2B | -51% |
Caesars Entertainment | CZR | Cruise & Casino | $10B | $4.2B | -58% |
Eldorado Resorts | ERI | Cruise & Casino | $5.4B | $1.3B | -76% |
Marriott International | MAR | Hotels & Resorts | $48.3B | $25.7B | -48% |
Hilton | HLT | Hotels & Resorts | $31.3B | $19.4B | -38% |
Hyatt Hotels | H | Hotels & Resorts | $9.1B | $4.9B | -46% |
Choice Hotels International | CHH | Hotels & Resorts | $6B | $3.2B | -46% |
Wyndham Hotels & Resorts | WH | Hotels & Resorts | $5.6B | $2.9B | -48% |
Park Hotels | PK | Hotels & Resorts | $5.5B | $1.9B | -66% |
Vail Resorts | MTN | Hotels & Resorts | $9.98B | $5.8B | -41% |
Marriott Vacations Worldwide | VAC | Hotels & Resorts | $5.3B | $2.2B | -59% |
For instance, the consequences on various travel bookings brands have been severe. Booking Holdings, the parent company to Booking.com, Priceline, Kayak and OpenTable, witnessed share price declines of over 35% since the peak.
Empty Stadiums
Across the entertainment industry, ticket sales for concerts, movies, and other events are falling precipitously due to cancellations or postponements.
Upwards of $5B in global film industry losses could result from the COVID-19 pandemic.
Chilling footage of the Las Vegas strip, as well as other tourist epicenters around the world, shows deserted streets as visitors opt to stay home instead.
Bracing For Impact
Meanwhile, worldwide airline revenue is estimated to fall by as much as $113B in 2020.
In under two months, the share price of Delta Airlines has fallen over 50% as the company anticipates a capacity reduction of 40%, the largest in its history.
Company | Ticker | Feb 19 2020 Share Price | Mar 24 2020 Share Price |
---|---|---|---|
Delta Air Lines | NYSE:DAL | $58.5 | $26.9 |
United Airlines | NASDAQ:UAL | $79.4 | $33 |
American Airlines | NASDAQ:AAL | $28.3 | $13.9 |
Southwest Airlines | NYSE:LUV | $56.89 | $37.7 |
Alaska Air Group | NYSE:ALK | $65.2 | $28.9 |
Air Canada (in CAD) | TSX:AC | $45.3 | $15.1 |
The global airline industry—which employs over 10M people—supports $2.7T in global economic activity across an average of 12M passengers per day.
Aruba, Jamaica No More
As for the cruise line industry, global operations came to a 30-day standstill in mid-March. Over 800 COVID-19 cases and 10 deaths across three cruise ships have been discovered.
“COVID-19 on cruise ships poses a risk for rapid spread of disease, causing outbreaks in a vulnerable population, and aggressive efforts are required to contain spread.”
—CDC
Carnival, a Miami-based company, has witnessed its share price fall to around one third of its February 19 value. Similarly, Royal Caribbean Cruises, which has seen its market cap plummet almost 70%, announced that it will suspend trips until mid-May.
Occupancy Dilemma
As the hotel industry is impacted by the global outbreak, share prices have also realized a significant slump. In the U.S., an estimated $1.4B in revenue is vanishing each week. If occupancy levels fall by just 30% this year, the U.S. hotel industry could see approximately 4 million jobs wiped out.
The Baird/STR Hotel Stock Index, which serves as a benchmark for the sector’s overall health, has declined over 47% year-to-date.
Global Stimulus Response
A number of travel industries around the world are calling for stimulus packages.
On March 25, the U.S. Congress finalized a historic $2T deal, which includes $25B in grants for the airline industry. In the UK, officials are providing small businesses in hospitality and leisure grants that are worth up to $30,000 as part of its $400B bailout plan.
China, Germany, Italy, and Spain have outlined multibillion dollar proposals in response to COVID-19. Overall, at least eleven countries have announced stimulus plans along with the European Commission and the IMF.
When Will the Travel Wave Hit Again?
Amid the COVID-19 pandemic one thing is clear: the impact on the travel industry will have a marked effect on the broader economy.
Travel is closely linked with oil, as transportation accounts for over 60% of global demand. In Q2 2020, global oil consumption is projected to fall by 25M barrels per day.
Along with this, discretionary consumer spending makes up over one third of America’s GDP. The impact of the pandemic across this sector is expected to contribute to a 10% decline or more in U.S. GDP for the second quarter.
As conditions materially improve around the world—with China beginning to open up flights—positive signs are emerging from under the surface. Will BEACH industries quickly bounce back as infection rates drop, or will a slow and painful recovery unfold in the months ahead?
Markets
Beyond Big Names: The Case for Small- and Mid-Cap Stocks
Small- and mid-cap stocks have historically outperformed large caps. What are the opportunities and risks to consider?
Beyond Big Names: The Case for Small- and Mid-Cap Stocks
Over the last 35 years, small- and mid-cap stocks have outperformed large caps, making them an attractive choice for investors.
According to data from Yahoo Finance, from February 1989 to February 2024, large-cap stocks returned +1,664% versus +2,062% for small caps and +3,176% for mid caps. Â
This graphic, sponsored by New York Life Investments, explores their return potential along with the risks to consider.
Higher Historical Returns
If you made a $100 investment in baskets of small-, mid-, and large-cap stocks in February 1989, what would each grouping be worth today?
Small Caps | Mid Caps | Large Caps | |
---|---|---|---|
Starting value (February 1989) | $100 | $100 | $100 |
Ending value (February 2024) | $2,162 | $3,276 | $1,764 |
Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.
Mid caps delivered the strongest performance since 1989, generating 86% more than large caps.
This superior historical track record is likely the result of the unique position mid-cap companies find themselves in. Mid-cap firms have generally successfully navigated early stage growth and are typically well-funded relative to small caps. And yet they are more dynamic and nimble than large-cap companies, allowing them to respond quicker to the market cycle.
Small caps also outperformed over this timeframe. They earned 23% more than large caps.Â
Higher Volatility
However, higher historical returns of small- and mid-cap stocks came with increased risk. They both endured greater volatility than large caps.Â
Small Caps | Mid Caps | Large Caps | |
---|---|---|---|
Total Volatility | 18.9% | 17.4% | 14.8% |
Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.
Small-cap companies are typically earlier in their life cycle and tend to have thinner financial cushions to withstand periods of loss relative to large caps. As a result, they are usually the most volatile group followed by mid caps. Large-cap companies, as more mature and established players, exhibit the most stability in their stock prices.
Investing in small caps and mid caps requires a higher risk tolerance to withstand their price swings. For investors with longer time horizons who are capable of enduring higher risk, current market pricing strengthens the case for stocks of smaller companies.
Attractive Valuations
Large-cap stocks have historically high valuations, with their forward price-to-earnings ratio (P/E ratio) trading above their 10-year average, according to analysis conducted by FactSet.
Conversely, the forward P/E ratios of small- and mid-cap stocks seem to be presenting a compelling entry point.Â
Small Caps/Large Caps | Mid Caps/Large Caps | |
---|---|---|
Relative Forward P/E Ratios | 0.71 | 0.75 |
Discount | 29% | 25% |
Source: Yardeni Research (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.
Looking at both groups’ relative forward P/E ratios (small-cap P/E ratio divided by large-cap P/E ratio, and mid-cap P/E ratio divided by large-cap P/E ratio), small and mid caps are trading at their steepest discounts versus large caps since the early 2000s.
Discovering Small- and Mid-Cap Stocks
Growth-oriented investors looking to add equity exposure could consider incorporating small and mid caps into their portfolios.
With superior historical returns and relatively attractive valuations, small- and mid-cap stocks present a compelling opportunity for investors capable of tolerating greater volatility.
Explore more insights from New York Life Investments
-
Markets2 days ago
Swiss Watches: Market Share by Brand in 2023
In this graphic we rank the top Swiss watch brands, based on their estimated 2023 market share.
-
Markets4 days ago
Charted: Luxury Goods Investments vs. S&P 500 in the Last 10 Years
How does investing in luxury goods like expensive watches and rare whisky compare to other goods, or to the S&P 500?
-
Markets6 days ago
Visualizing the World’s Largest Sovereign Wealth Fund
This graphic breaks down the portfolio of the world’s largest sovereign wealth fund, valued at $1.4 trillion.
-
Markets7 days ago
The 12 Worst Investment Funds Over the Past Decade
The 12 worst investment funds have destroyed $56 billion in shareholder wealth over the past decade, as of Dec. 2023.
-
Markets1 week ago
Visualizing the Biggest Companies on Major Stock Exchanges
With trillion dollar valuations becoming more common, we’ve compared the five biggest companies by stock exchange.
-
Markets1 week ago
Will Tesla Lose Its Spot in the Magnificent Seven?
We visualize the recent performance of the Magnificent Seven stocks, uncovering a clear divergence between the group’s top and bottom names.
-
Demographics5 days ago
Top 20 Countries Where Older People Are the Happiest
-
Markets1 week ago
Ranked: The 20 Top Chinese Stocks by Market Cap, and Performance YTD
-
Markets1 week ago
Will Tesla Lose Its Spot in the Magnificent Seven?
-
Technology1 week ago
Charted: The Jobs Most Impacted by AI
-
Markets1 week ago
Visualizing the Biggest Companies on Major Stock Exchanges
-
Money1 week ago
The World’s Top 50 Largest Banks by Consolidated Assets
-
Demographics1 week ago
Visualizing the Declining Birth Rate in Japan
-
Technology1 week ago
The World’s Largest Corporate Holders of Bitcoin