Airlines shares surged after Moderna announced a viable vaccine in November. Getty Images Text size Few actions have followed the realities and feelings surrounding Covid-19 as closely as the travel and entertainment industries. They fluctuated in price in line with the daily headlines, and the good news couldn’t get any traction – until recently. The promise of vaccine delivery within months is great news for the timing of economic recovery. Many investors have taken the news as a signal to start jumping into the downtrodden stocks of airlines, cruise ships, restaurant chains and other leisure stocks. Consider the reaction to Moderna’s announcement of a viable vaccine on November 16: American Airlines and Delta shares jumped 6% and United stock jumped 8% for the day. But many analysts say caution and patience are needed. Major upheavals in the economy have resulted in a highly bifurcated industry requiring careful fundamental analysis of each company, rather than making large-scale sector bets, says Charles Ryan, partner and co-portfolio manager at Evercore Wealth Management at New York. Even with careful inventory analysis, giant unknowns – like how long until a vaccine is distributed? Who will get it first and how will it impact the economy? —This still creates very different opinions about the prospects for many types of leisure actions. Consider Disney. Ryan acquired shares of the theme park operator in March around the stock market lows in 2020. “We took a stand – we knew there would be theme park closures, but other parties of the company, especially the Disney Plus streaming business, has been received much better than people expected, ”says Ryan, who adds that Disney is a fundamental choice. Its entry point was around $ 103 and the stock returned to around $ 140. Meanwhile, Jim Boothe, chief investment officer at Brentview Investment Management in Los Angeles, isn’t convinced about Disney’s prospects. “We owned Disney, but we sold it after omitting or suspending their dividends,” he says. “We were concerned that the theme parks and the movies would take too long to come back.” “Think of cruise lines and destinations like Disney – there’s a bit of a disconnect,” Ryan says, adding that cruise lines have been removed from his portfolio, while he has exposure at Disney. There is however a certain merger of minds on certain types of leisure stocks. Typically, media and entertainment companies with a strong presence in the video game industry have held up on demand from gamers with more free time under orders to stay at home. “PlayStation, Sony and Microsoft are coming out with new consoles for the first time in about five years and it’s creating a lot of excitement,” says Ryan. “Activision Blizzard, Tencent, and Electronic Arts have great products and amazing brands. They have to renegotiate with certain groups like MLS Football and Madden. There is sustainability and excitement around the fact that when you roll out new consoles, there are new software, games, and upgrades. Boothe loves Viacom. It picked up stocks during the March stock market low, as the company traded at twice its earnings. “We thought it was absurd,” he says. “It brought in 4%.” The big challenges for Viacom are its declining movie segment, “but parts of the business are relatively stable and the cash flow is good,” Boothe says. When it comes to actions best avoided, Ryan points to cruise lines, which were beaten earlier this year with the start of the pandemic after a strong 2019. 15% in 2019, but in a reversal of fortunes in the first quarter of this year, its share price fell from a high of $ 114 to below $ 40. “We were long term owners of Royal Caribbean and made a good amount of money, and we got out before it hit its low,” Ryan says. Finances are always negative from an earnings performance perspective, “but that’s something I’m keeping an eye on,” Ryan says. “I’ve known management for a long time and from a geography and innovation perspective I think it will survive – it’s just a little too early to get involved. He says he wants to see a recovery in business before finding entry points. “There will be a hiccup as they resume their activities, and this could be an opportunity to return,” he says. In Boothe’s opinion, airlines and hotels are not quite bought yet. “They are particularly dependent on business travel because it is more profitable for them,” he says, adding that a recovery in business travel is a long-term scenario. Ryan sees an additional problem in the fact that airlines have struggled to differentiate themselves for years. “It’s not something that we think is a big industry other than commerce, but our holding period is 3.5 to five years and I can’t imagine owning one,” he says, but acknowledges that Southwest Airlines is arguably the most sustainable airline and Delta’s management is strong relative to its peers. “We watch them sometimes, but we didn’t pull the trigger,” says Ryan. .