No, this isn’t a lesson in gravity…
It’s not even a lesson in trading…
It’s a lesson in the popularity of certain industries at certain times – and why no trend, no matter how strong it seems – can last forever.
The pandemic may have forever changed the landscape of the markets – it’s showed us that there are some industries that can weather the storm – and others that get pushed around like a leaf in a hurricane…
But most importantly, it showed us that no matter what the economic climate – there are still ways for the savvy investor to make money.
However…
There may be one pandemic favorite that you may want to start shedding from your portfolio if you bought it – as it seems the bottom may be about to drop out.
Now…
After the initial panic in the beginning, things started stabilizing a bit – and people started to jump back in after the end of the volatility that started at the end of March.
There ended up a few performers that ended up making some people a LOT of cash during a time when nobody believed it to be possible.
One of the biggest performers shocked a lot of people – as it seemed like not only the company, but the industry it was entrenched in was going to take a HUGE hit.
Carnival Corp (CCL) – the parent company of luxury cruise lines: Carnival, Princess and others – took a HUGE hit over the initial onset of the COVID panic – came back to create a nice little profit for people who bought off the bounce.
At one point – the stock price hit a low of $8.48, down from a high $51.90 back in January…
While that’s obviously a huge hit – if you bought at $8.49… congratulations! Right now the stock is sitting just under $22.
It’s weird…
You’d have thought the entire travel industry would have been destroyed over the pandemic – as the fact that very few people were brave enough or even allowed to travel at some points brought a lot of these companies to their knees.
But they survived…
And, in fact, they did more than that for a while – they thrived – like a lot of the airline companies.
Jet Blue (JBLU) which dropped all the way down to $7.15 after the virus hit US shores – wound up rebounding all the way up to $15.61…
United Airlines, which dropped all the way down to $19.92 after the panic – wound up climbing back up to a respectable $49.24…
This was great AND unexpected – again – as nobody was expecting any stocks in the travel industry to be worth a darn for a while.
However, there are rumors swirling of more lockdowns coming – and with more lockdowns – come more travel restrictions…
And if that’s the case – then it seems that these companies are going to go through another downturn – and JP Morgan Chase agrees with that assessment.
One of their top analysts, Jaime Baker, has downgraded more than a few airline stocks for the next coming months – and keeping what’s going on right now in mind – it’s easy to see why.
What is it that Baker sees or DOESN’T see happening for companies like Jet Blue, United and Spirit Airlines (SAVE)?
Well, he says it actually doesn’t have much to do with any potential pandemic lockdowns at all…
He says it comes down to their valuations after the strong rallies of the past six months.
Baker said, “What began as a simple housekeeping response to disappointing but unsurprising 4Q demand trends has, instead, become a recommendation for selective profit-taking.”
The rallies that have come after the panic have actually pushed some of these companies’ prices past their targets that were based of 2022 projections…
Which means there really isn’t enough proof in the pudding to validate the high valuations these companies are at now.
In fact, he said the best outlook for these three stocks in the short term, at best, is another 7% gain, which would put them BELOW their industry as a whole…
So, he’s downgraded them with just cause – advising people to lock in their profits and then wait for another price dip before considering getting back in on these stocks.
However, if you do own Delta (DAL) – keep it for now! Baker is still bullish on this cornerstone of the airline industry…
Which is better than abandoning the market altogether.
So, take that information and do with it what you will…
If you think you’d like a little more guidance and help in your OWN investing – know that GorillaTrades is always here for you.
There’s a reason we’ve become one of the most respected stock recommendation sites on the internet – and we’d love for you to be a part of our next round of picks.
However, if you want to go it alone, we get that…
Just know we’re always here when you need the help.
Until next time…
“When everything seems to be against you, remember that an airplane takes off against the wind, not with it.” — Henry Ford