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Memorial Day Profits

Written by Jason Williams
Posted May 19, 2017

Every year, millions greet the official beginning of summer vacation season by taking a trip on Memorial Day. By this time next week, many Americans will already be heading out of town. They’ll be visiting relatives, relaxing on a beach, cooling off in a lake, or just getting away from everything for a few days.

Americans are already getting ready for a long weekend away from home. I’m one of them. Next weekend, I’ll be doing some hiking and camping in upstate New York with some old friends. It’s going to be some much-needed nature, and I can’t wait!

There are some businesses that can’t wait, either. In my youth, I worked for a pizza place at the Jersey Shore. We marked the start of busy season with Memorial Day. The drivers couldn’t wait for it. Tourists would flood the town, and some of us would walk away with well over $1,000 in tips after the four-day weekend.

But small businesses in resort towns aren’t the only ones getting ready for the onslaught of travelers. There are some big (and publicly traded) ones that are going to get a huge boost from the increased travel as well.

AAA sends out annual Memorial Day travel predictions. This year, the company expects we’ll see the most travel since 2005. If that sounds familiar, it’s because this is the third consecutive year Memorial Day travel has grown.

The company expects to see over 39 million people head out on a trip 50 miles or more from their homes next weekend.

Today, I’m going to use the AAA holiday weekend travel predictions to break down a couple of the industries that stand to benefit the most from the weekend-long celebration.

Profit at the Pump

Despite the highest gas prices since 2015, AAA estimates that 34.6 million Americans are going to hit the road and drive to their destination next weekend. That’s over 88% of all weekend warriors, and 2.4% more than last year, when average gas prices were $0.11 lower.

So, what companies are going to profit from that uptick in long-haul drivers? Gas stations, of course.

And while you could invest in Exxon (XOM) or Royal Dutch Shell (RDS-A, RDS-B), you wouldn’t be getting a pure play on the end market. They’re drillers and explorers, too. If you want to hone in on the increase in consumer spending this holiday, you need to go with simplified operations.

I’ve got three companies at the top of my list for gas investments...

First, there’s Valero Energy Corp. (VLO). It’s a refiner and marketer of petroleum products with about 7,400 stations across the country. It’s got pretty good valuation ratios, too. With a forward P/E of 10.26, it’s the most undervalued of my picks.

Next is Marathon Petroleum (MPC). The company markets gas and diesel to American drivers through 5,500 independent retail outlets in 19 states. It also helps drivers fill up their internal tank with 2,730 convenience stores spread across the country. Again, this is an undervalued stock compared to the rest of the industry. And it pays a very nice 4.55% dividend.

The last stock on my gas list is Phillips 66 (PSX). It’s more diversified than the first two but still a solid play on increased travel. The company refines, transports, and sells petroleum products across the country. And like the others, it’s an undervalued stock. The forward P/E is well below industry standards at 12.27. And it pays a solid dividend of 3.6%.

Flying the (Sometimes) Friendly Skies

While most Americans will hit the road this holiday, there will be more taking to the skies than in 2016. Nearly 3 million vacationers will be flying to their destinations this Memorial Day. That’s 5.5% more than last year.

Most will be heading somewhere in the country, but a number will take advantage of the long weekend to head on an international trip, too. This year, Europe is the top destination for those intrepid travelers.

Thanks to the increase in travelers and an increase in average ticket prices, airlines should have a windfall weekend.

My top picks are Southwest (LUV), JetBlue (JBLU), and United Airlines (UAL).

Both Southwest and JetBlue are going to capitalize on all the extra domestic travel, especially from those looking to save some cash with discounted fares.

They’ve both got hubs in most of the major travel cities and nonstop flights all over the country and into the Caribbean and Mexico. And both are the perfect pick for someone trying to get farther away and spend as little time in the air as possible.

Both sport enticing valuations and are primed to benefit from the increase in domestic travel this year. Southwest even pays a dividend.

United might surprise you some after all the negative press it’s received lately. But it’s still one of the three big airlines and one of the only ways for Americans to get out of the country. It’s got flights directly to all the top European destinations for 2017. And it stands to see increased bookings from international travelers this year.

United has excellent valuation metrics and consistently beats earnings estimates. If you’re looking to capitalize on more people taking to the skies this year, United is a good stock to own.

You Have to Stay Somewhere

Hotels are going to have a great weekend, too. Average prices are about 18% higher than last year, but folks still need a place to leave their stuff and rest after a long day of fun.

You can always invest in the big-name chains like Marriott (MAR) or Hilton (HLT). But you might be missing out on some undervalued and lesser-known gems if you do.

From a valuation standpoint, I really like Park Hotels (PK) and Wyndham Worldwide (WYN).

Park has a PEG ratio of just 0.48. That means it’s incredibly undervalued compared to its expected earnings growth.

And it’s got hotels spread across the country and over the globe. In all, Park has about 35,000 rooms available. And you can bet most of them will be filled with Memorial Day travelers next weekend.

Wyndham’s valuation is nothing to sneeze at, either. It’s got a forward P/E lower than any other hotel chain in the U.S. and nearly 700,000 rooms waiting for vacationers this coming holiday weekend. The company offers experiences from upscale to economy, so it’s the perfect choice for travelers on any budget.

Renting the Road

Remember all those people driving somewhere next weekend? Well, a lot of them are going to be renting cars to make the journey. In fact, rental car bookings are 19% higher than last year according to AAA.

And that’s going to bode well for two major car-rental companies, especially since rental rates are up by about 7% over last year.

Your choices here are Hertz (HTZ) and Avis (CAR). Both are great investments, and each has its own advantage.

Hertz won top honors for both its variety of vehicle models and its stellar customer service. Travelers looking for a specific type of car are going to head to their nearest Hertz rental center next weekend. Folks who want the all-star treatment are likely to stop by also.

Avis has the advantage of vehicle sales. The company sells its fleet vehicles after a few years and makes a ton of revenue doing it. Drivers looking for a multi-day test drives next weekend can head over to Avis and take their dream car on vacation to make sure it’s a fit.

Invest and Travel Safely

There you have it: my recommendations to capitalize on increased travel this upcoming holiday weekend.

Before I go, one more note from the AAA report. The company expects to rescue around 330,000 motorists next weekend, mostly for flat tires, lockouts, and battery issues.

But since Memorial Day is one of the busiest travel holidays, it’s also one of the most dangerous. There will be a lot of drivers out there, and there will be a lot of accidents.

Make sure you’re not distracted while driving. If you’ve been drinking, get a cab if you don’t have a sober designated driver.

And most of all, enjoy your holiday. I know I will.

To investing with integrity (and having fun),

Jason Williams
Wealth Daily

Follow me on Twitter @AllBeingsEqual

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