12 Most Undervalued Travel Stocks To Buy According To Hedge Funds

Published on January 31, 2023 at 3:12 pm by Fahad Saleem in Hedge Funds, News

In this article, we will take a look at the 12 most undervalued travel stocks to buy according to hedge funds.

Despite the rising inflation and tough market conditions globally, the demand in the travel industry is showing no signs of cooling. In fact, estimates suggest the global travel industry will see huge growth in 2023. According to a Bloomberg report, global tourism in 2023 is expected to reach 80% to 95% of pre-pandemic levels. The report, which quoted data from the United Nations World Tourism Organization, said the tourism industry reached about 63% of the pre-pandemic levels in 2022.

However, the United Nations World Tourism Organization said travel patterns will be affected amid financial worries and inflation. For example, the UN body said travelers will expect more value for money this year and are expected to stay closer to home. The report also said that growth in travel demand in the Middle East and Europe will be the fastest. These two regions are expected to catch up with the pre-pandemic levels this year when it comes to travel and tourism.

According to the Bloomberg report, about half of American travelers say financial pressures will impact their travel decisions in the coming six months, according to a January 2023 sentiment survey from tourism market research firm Longwoods International. A whopping 56% of the survey respondents said airfare is the biggest factor in this equation.

Photo by Hilmi Can Taşkıran on Unsplash

Our Methodology

For this article, we first used the Finviz stock screener to find stocks from the travel services and resorts & casinos industries of the consumer cyclical sector. We got a long list of stocks, out of which we narrowed down to only those that had forward PE ratios of 20 or less as of January 27. We then picked 12 stocks from this resultant dataset which had the highest number of hedge fund stakeholders as of the end of the third quarter. To find that metric we used Insider Monkey’s database of 920 hedge funds. Forward PE ratio data was taken from the “statistics” tab of these companies’ Yahoo Finance pages.

The list is ranked in ascending order of the number of hedge funds having stakes in these companies.

12. Travelzoo (NASDAQ:TZOO)

Number of Hedge Fund Holders: 5

PE Ratio as of January 27: 6.98

Travelzoo (NASDAQ:TZOO) is a New York-based company that has an interesting business model in the travel industry. Travelzoo (NASDAQ:TZOO) on its platforms publishes deals related to travel, entertainment centers, restaurants and spas. In December, Travelzoo (NASDAQ:TZOO) stock jumped as much as 9% after Travelzoo (NASDAQ:TZOO) posted strong guidance for the fourth quarter. Travelzoo (NASDAQ:TZOO) said it expects its Q4 revenue to come in at about $18.5 million, up 31% Y/Y. This easily beats consensus of $17.60 million.

Analysts believe Travelzoo (NASDAQ:TZOO)’s business model is diversified. Travelzoo (NASDAQ:TZOO) is not totally reliant on the travel industry. It also thrives on the domestic entertainment activities. Travelzoo (NASDAQ:TZOO) has a whopping 30 million members and works with more than 5,000 travel suppliers.

11. Bluegreen Vacations Holding Corporation (NYSE:BVH)

Number of Hedge Fund Holders: 13

PE Ratio as of January 27: 8.8

Bluegreen Vacations Holding Corporation (NYSE:BVH) is a small player in the travel and vacation rentals industry. Bluegreen Vacations Holding Corporation (NYSE:BVH) has a market cap of $715 million. Bluegreen Vacations Holding Corporation (NYSE:BVH) operates vacation resorts and vacation rentals. In the third quarter, Bluegreen Vacations Holding Corporation (NYSE:BVH)’s GAAP EPS came in at $1.19, beating estimates by $0.12. Revenue in the period jumped about 17% to total $250.8 million, beating estimates by $13.73 million. Bluegreen Vacations said its system-wide sales of vacation ownership interests jumped 15% to reach $206.9 million from $180.6 million in the prior year quarter. Number of guest tours increased by 11% in the quarter to 69,490.

A total of 13 hedge funds tracked by Insider Monkey reported having stakes in Bluegreen Vacations Holding Corporation (NYSE:BVH). The total value of these stakes was about $22.1 million.

10. Playa Hotels & Resorts N.V. (NASDAQ:PLYA)

Number of Hedge Fund Holders: 27

PE Ratio as of January 27: 17.14

Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is a Virginia-based hotels and resorts operator. In November, Playa Hotels & Resorts N.V. (NASDAQ:PLYA) posted its third quarter results. Playa Hotels & Resorts N.V. (NASDAQ:PLYA)’s revenue in the period jumped about 35% to come in at $206.6 million, beating estimates by $10.01 million. Adjusted EPS in the quarter totaled $0.04, missing estimates by $0.02.

A total of 27 hedge funds tracked by Insider Monkey reported having stakes in Playa Hotels & Resorts N.V. (NASDAQ:PLYA) as of the end of the third quarter. The total worth of these stakes was $358 million.

9. Hilton Grand Vacations Inc. (NYSE:HGV)

Number of Hedge Fund Holders: 29

PE Ratio as of January 27: 16.27

Hilton Grand Vacations Inc. (NYSE:HGV) is a Florida-based company that operates hotels and resorts globally. With a PE ratio of 16.27, Hilton Grand Vacations Inc. (NYSE:HGV) is one of the most undervalued travel stocks to buy according to hedge funds.

A total of 29 hedge funds tracked by Insider Monkey reported having stakes in Hilton Grand Vacations Inc. (NYSE:HGV) as of the end of the third quarter. The total value of these stakes was about $1 billion.

8. Tripadvisor, Inc. (NASDAQ:TRIP)

Number of Hedge Fund Holders: 33

PE Ratio as of January 27: 15.90

Tripadvisor, Inc. (NASDAQ:TRIP) ranks 8th in our list of the most undervalued travel stocks to buy according to hedge funds. As of the end of the September quarter of 2022, 33 hedge funds reported having stakes in Tripadvisor, Inc. (NASDAQ:TRIP). The total value of these stakes was about $799 million. The biggest stakeholder of Tripadvisor, Inc. (NASDAQ:TRIP) during this period was Paul Reeder and Edward Shapiro’s PAR Capital Management, which has a $199 million stake in Tripadvisor, Inc. (NASDAQ:TRIP).

Tripadvisor, Inc. (NASDAQ:TRIP) shares took a hit on November after the company posted weak Q3 results. TripAdvisor’s management said it also expected FX headwinds to impact its fourth quarter results. Consolidated revenue is expected to increase by a low-single digit percentage from 2019. However, in the fourth quarter, Tripadvisor, Inc. (NASDAQ:TRIP) is expecting a “modest” slowdown when compared to the third quarter.

These concerns are keeping Tripadvisor, Inc. (NASDAQ:TRIP)’s valuation depressed. Tripadvisor, Inc. (NASDAQ:TRIP) might be a decent travel pick for long-term investors.

Here is what GreenWood Investors specifically said about Tripadvisor, Inc. (NASDAQ:TRIP) in its Q2 2022 investor letter:

“Tripadvisor, Inc. (NASDAQ:TRIP)’s world class board has appointed a new CEO to optimize every aspect of its core business — something it has long gone without. Matt Goldberg’s background at The Trade Desk (TTD) and multiple direct-to-consumer web properties (such as the Lonely Planet) make him perfectly positioned to better monetize TripAdvisor’s long admired position as the world’s most visited travel website. The exciting part of Matt’s mission is that he wants to make core TripAdvisor great again, in its hotel auction, in the TripAdvisor Plus model, and in the new advertising verticals it has developed for hotels, restaurants and tour operators.

This year’s travel season is absolutely on fire, but there are substantially more legs to this rally. Americans are traveling abroad 30% less frequently than before Covid. This is a core demographic for TripAdvisor’s traffic and purchase intent. So while the market worries that certain travel businesses are experiencing peak earnings in 2022, we believe there is substantial room to run for those focused on a more international destination, like TripAdvisor. But the real upside will come from TripAdvisor’s determination to extract value from its two fastest-growing supply aggregation properties: Viator and The Fork. Both platforms dominate their respective fields and are aggressively acquiring new customers. Viator’s experiences supply is without comparison in the world, and it is currently processing twice the amount of transactions than it was prior to Covid. Given over 80% of travel experiences are still booked offline, Viator looks as attractive to us, if not more so, than booking.com did a few decades ago.”

7. Travel + Leisure Co. (NYSE:TNL)

Number of Hedge Fund Holders: 35

PE Ratio as of January 27: 9.60

Travel + Leisure Co. (NYSE:TNL) ranks 7th in our list of the most undervalued travel stocks to buy according to hedge funds. Travel + Leisure Co. (NYSE:TNL) sells vacation properties with a shared ownership model. Of the 920 hedge funds tracked by Insider Monkey as of the end of the third quarter, 35 hedge funds had stakes in Travel + Leisure Co. (NYSE:TNL). The total value of these stakes was $423 million. Travel + Leisure Co. (NYSE:TNL) is a dividend-paying company. Travel + Leisure Co. (NYSE:TNL)’s dividend yield stands at 3.82% as of January 27. In November, Travel + Leisure Co. (NYSE:TNL) declared a dividend of $0.40 per share, in-line with the previous quarterly dividend. The dividend was payable on December 30.

6. Boyd Gaming Corporation (NYSE:BYD)

Number of Hedge Fund Holders: 36

PE Ratio as of January 27: 11.77

Boyd Gaming Corporation (NYSE:BYD) operates hotels and casinos and is among the biggest beneficiaries of the travel rebound in the world. Earlier this month, investment firm Credit Suisse started covering Boyd Gaming Corporation (NYSE:BYD) with an Outperform rating. Credit Suisse’s analyst Benjamin Chaiken praised Boyd Gaming Corporation (NYSE:BYD)’s growth opportunities in the iGaming industry. The firm also cited Boyd Gaming Corporation (NYSE:BYD)’s valuation of 12.5X the 2024 free cash flow estimate for its bullish rating. Credit Suisse set an $82 price target on Boyd Gaming Corporation (NYSE:BYD).

In December 2022, Boyd Gaming Corporation (NYSE:BYD) announced a dividend of $0.15 per share, in line with previous. Forward dividend yield at the time came in at 1.02%. Of the 920 hedge funds tracked by Insider Monkey, 36 hedge funds had stakes in Boyd Gaming Corporation (NYSE:BYD).

5. Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH)

Number of Hedge Fund Holders: 38

PE Ratio as of January 27: 11.81

Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) bulls believe the company could gain in 2023 and beyond amid a huge rise in demand as travelers across the world continue to spend on leisure despite tough market conditions.

Earlier in January, NCL Corporation, a subsidiary of Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH), said it will sell about $500 million of its senior secured notes due 2028 in a private offering. Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) said net proceeds will be used to repay a portion of the term loans outstanding under senior secured credit facility that will become due in January 2024.

Investment firm Truist in a note published earlier in January said cruise stocks, including Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH), are “finally starting to participate in their fair share of the travel recovery.”

4. Royal Caribbean Cruises Ltd. (NYSE:RCL)

Number of Hedge Fund Holders: 42

PE Ratio as of January 27: 14.43

Royal Caribbean Cruises Ltd. (NYSE:RCL) received bullish comments from Truist earlier this month. The firm’s analyst C. Patrick Scholes said that Royal Caribbean Cruises Ltd. (NYSE:RCL), among other cruise stocks, is finally benefitting from the recovery in the industry. The analyst said that cruise stocks are expected to benefit further from the travel demand in 2023, citing his channel checks. The analyst said his checks point to a 50% jump in industry-wide sales as compared to the same period in 2019. The analyst sees a “sense of urgency” in booking trends.

Perhaps that’s why hedge funds are beginning to load up on Royal Caribbean Cruises Ltd. (NYSE:RCL). As of the end of the third quarter, 42 hedge funds reported having stakes in Royal Caribbean Cruises Ltd. (NYSE:RCL), compared to 28 funds in the previous quarter. This shows a huge spike in hedge fund sentiment for Royal Caribbean Cruises Ltd. (NYSE:RCL).

3. Delta Air Lines, Inc. (NYSE:DAL)

Number of Hedge Fund Holders: 53

PE Ratio as of January 27: 19.07

Delta Air Lines, Inc. (NYSE:DAL) is among the most undervalued travel stocks to buy according to hedge funds. Of the 920 hedge funds in Insider Monkey’s database, 52 hedge funds had stakes in Delta as of the end of the third quarter, up from 49 hedge funds from the previous quarter. The total worth of these stakes was $1.3 billion.

Earlier in January, Morgan Stanley analyst Ravi Shanker gave bullish comments on Delta Air Lines, Inc. (NYSE:DAL). The analyst said that the “coast is clear” for Delta to “do what it does best… fly a leading airline franchise on the way to earning $7 EPS.”

The analyst believes Delta Air Lines, Inc. (NYSE:DAL) is in a strong position to take advantage of the strong demand in the travel industry. Referring to the soft Q1 guidance by Delta Air Lines, Inc. (NYSE:DAL), Shanker said it was the result of “idiosyncratic quirks” on the timing of costs.

2. Expedia Group, Inc. (NASDAQ:EXPE)

Number of Hedge Fund Holders: 76

PE Ratio as of January 27: 13.76

Expedia Group, Inc. (NASDAQ:EXPE) is one of the most notable players in the online travel space. In December, Goldman Sachs added Expedia Group, Inc. (NASDAQ:EXPE) in its list of stocks that are exposed to the travel theme in 2023. Expedia Group, Inc. (NASDAQ:EXPE) said in a note to investors that amid the post-pandemic travel rebound, the evolution in the travel industry involves “taking more of the consumer wallet per trip” and marketing leverage. The firm says Expedia Group, Inc. (NASDAQ:EXPE) is one of the top players most exposed to this theme

A total of 76 hedge funds tracked by Insider Monkey had stakes in Expedia Group, Inc. (NASDAQ:EXPE) as of the end of the third quarter. The total value of these stakes was $2.9 billion. The biggest stakeholder of Expedia Group, Inc. (NASDAQ:EXPE) was PAR Capital Management managed by Paul Reeder and Edward Shapiro.

Here is what Miller Value Partners specifically said about Expedia Group, Inc. (NASDAQ:EXPE) in its Q3 2022 investor letter:

“Expedia Group, Inc. (NASDAQ:EXPE) ($92.69) has a high teens free cash flow yield, trades at 14x 2022 and 10x 2023 earnings. We believe it can sustain earnings per share growth in the mid-teens. It massively improved its business and margins during the pandemic, has repaired its balance sheet and is chaired by an amazing capital allocator, Barry Diller. We think it’s worth more than double the current price.”

1. Booking Holdings Inc. (NASDAQ:BKNG)

Number of Hedge Fund Holders: 92

PE Ratio as of January 27: 20.33

As of January 27, Booking Holdings Inc. (NASDAQ:BKNG) has a forward PE ratio of 20.33. Even though the metric slightly crosses our threshold of 20 for the PE ratio metric, we are still including Booking Holdings Inc. (NASDAQ:BKNG) in our list because it is one of the top players in the travel industry and is among the favorite travel stocks of elite hedge funds in America. Of the 920 hedge funds tracked by Insider Monkey, 92 hedge funds reported owning stakes in Booking Holdings Inc. (NASDAQ:BKNG). The total worth of these stakes was $5.6 billion. The biggest stakeholder of Booking Holdings Inc. (NASDAQ:BKNG) was Natixis Global Asset Management’s Harris Associates, which owns an $883 million stake in the company.

Here is what L1 Capital International Fund has to say about Booking Holdings Inc. (NASDAQ:BKNG) in its Q3 2022 investor letter:

“During the December 2022 Quarter over 50% of the Fund’s holdings’ share prices increased by more than 10% in local currency with a number of them increasing by more than 20%. Five companies positively contributed over 0.5% (in AUD) to the Fund’s returns for the quarter. We added to our investment in Booking Holdings Inc. (NASDAQ:BKNG) prior to Q3 2022 results due to the share price overly discounting concerns about near term travel activity. Booking’s quarterly results were a standout, with the recovery in the travel industry following COVID-19 disruptions running well ahead of our expectations. Booking’s share price subsequently increased 23% in the December 2022 Quarter and has increased a further 14% so far in 2023 (in USD).”

You can also take a peek at Top 20 Financial Cities in the World and 15 Countries with the Largest Refining Capacity.

We may use your email to send marketing emails about our services. Click here to read our privacy policy.