One of the first groups to get sold once it appeared the economy was becoming weaker was travel and tourism stocks. The generally accepted thought was that Americans would be reluctant to travel when their wallets were feeling the pinch of declining home and stock prices, and with an increasing number of workers losing their jobs. The group in general actually began declining well before the financial crisis hit, as rising commodity prices also put a dent in consumers' wallets. While the declines in this group were certainly with merit, it appears the tide has been changing and many hotel stocks have been benefiting lately. (For related reading, see Travel Smart By Planning How You'll Pay)
Wyndham Worldwide Corporation (NYSE:WYN), for instance, is trading at fresh 52-week highs after a vicious decline from mid 2007 through early 2009. WYN was actually trading as low as $2.55 a share during the height of the financial crisis. More recently, WYN has been trading in a very orderly manner, quietly stair-stepping higher. It recently cleared a small base in early November and appears to have successfully tested the level on a subsequent pullback. It just broke to new highs again, and while it is probably not in a good buying area here, it does show strength in the stock and the group.
Home Inns & Hotels Management Inc. (Nasdaq:HMIN) is another stock that has recovered from a vicious correction. It is also trading at 52-week highs, and just recently cleared a base it had been building for a few months. The important level to watch for with this stock is the recent low in late November as it tested the recent breakout. If it were to break below this level, it would signal a breakout failure and set a lower low.
Marriott International, Inc. (NYSE:MAR) is another hotel stock that is well off its lows, although it is not quite as strong as the prior two stocks. While MAR is above the base it cleared in September, it has settled into a second base just above the prior one. It appears that the $25 level has held as support, and would be the area to watch moving forward. On the upside, the declining trend line marking the last few highs, would be an area to watch.
While Hyatt Hotels Corporation (NYSE:H) has been in existence for some time, the stock only recently had its IPO in November 2009. With such a new chart, there is not much history to look at, but the little there is has already revealed a few noteworthy levels. The current pattern is taking on the shape of a bull flag. The current trading range has also been fairly tight, with the $28 level marking the bottom and $30 marking the top. H is very close to testing a breakout on the upside, and a move above the recent highs would project a breakout towards $35 a share.
While unemployment is still at very high levels, the recent rebound in hotel stocks could be hinting at an expected rebound, or possibly an over correction over the past two years. While it's tempting to try and play economist and guess why these stocks are doing well, we can simply accept the fact and then watch the charts to see if they can maintain their strength. The good thing about these stocks is that the levels that would signify a failure are very clear, which makes the initial risk assessment much easier. Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
Charts courtesy of www.stockcharts.com
At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.