The S&P/ASX200 is higher on Friday, up 0.5% to 5879.50, bringing the year-to-date return to 5.79% at the time of writing. This performance has been driven by an unlikely source – travel companies.
Whilst the likes of Sydney Airport Holdings Pty Ltd (ASX: SYD) has struggled this year amid ongoing headwinds and rising competition, the technical environment remains supportive for the travel sector as a whole.
I’ve picked out three ASX200 companies that have gotten off to a flyer in early January and look set to go big in 2019.
Flight Centre Travel Group Ltd (ASX: FLT) is the largest and most established of the group, boasting a market cap of $4.45 billion and revenues of $2.95 million in the last financial year. The Flight Centre share price is up 5.14% so far this year and after a challenging 2018, down 6.02% on a one-year basis. I believe the company is potentially undervalued given its dominant market position. Flight Centre announced that it is targeting high-growth areas with key acquisitions in North America including Casto Travel and Umapped, which I believe is key to upwards potential for its share price.
Corporate Travel Management Ltd (ASX: CTD) and Webjet Limited (ASX: WEB) have both charged ahead in early 2019, outpacing the ASX200 to record returns of 12.26% and 12.47%, respectively. Webjet acquired B2B travel business Destinations of the World in November 2018 and similarly looks to be a great growth prospect for investors into 2019 and beyond. Corporate Travel is in a similarly good spot for growth, however, it was a target of notorious short-seller VGI Partners in late 2018 and saw its share price drop steeply on the back of a report questioning its accounting disclosures and impairment testing. VGI remains a significant shareholder in Corporate Travel and I would expect to see higher volatility in share price for as long as that remains the case.
I believe these three stocks could all slot into a Fool’s portfolio in 2019. Flight Centre’s P/E ratio of 16.9 is half that of both Corporate Travel (33.0) and Webjet (33.5), however, the latter two could offer growth diversification given arguably have much more room to grow. For as long as economic fundamentals remain positive in Australia and around the world, I don’t see a reason why these travel groups can’t all see their share prices take-off in the coming months.
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Motley Fool contributor Lachlan Hall holds no positions in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, and Sydney Airport Holdings Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.