The FTSE 100 soars 5% on vaccine hopes. Is it time to buy these travel stocks?

The recent news of a potential Covid-19 vaccine has seen the FTSE soar. Is this now the perfect time to buy travel stocks?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

travel company bus greets tourists at the airport to take to the hotel

Image source: Getty Images

Last week, I wrote an article about how the FTSE 100 was at its lowest level since March. Since I wrote this article, it has climbed nearly 12%. This has been due to both the ‘Biden bounce’, and news that Pfizer has developed a Covid-19 vaccine with a claimed 90% protection rate. This has caused a number of FTSE 100 stocks to climb rapidly, with a specific focus on travel stocks. But does this positive news make this the perfect time for me to buy these stocks?

This airline stock just soared 38%

After Rolls-Royce, IAG (LSE: IAG) was the largest riser in the FTSE 100 in Monday’s trading. Of course, the travel stock has been heavily affected by the pandemic, and its recent third-quarter trading update saw the company making an operating loss of €3.2bn. The recent imposition of further lockdowns in the UK and Europe has also been disastrous for the travel industry. This follows an incredibly hard summer brought about by the lack of tourism. As such, the British Airways owner has already had to raise £2.5bn in a rights issue to stay afloat. This resulted in share price lows of 66p (down from 260p at the start of the year).

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Nevertheless, after the recent news of a potential effective vaccine, there is certainly far more optimism surrounding this stock. For example, it now seems possible a third wave can be avoided, and this could allow the airline owner to return to profitability next year. 

As a result, this particular travel stock now looks to me to be a far more appealing buy than it did a month ago. Although problems do still abound within the travel industry, and there’s uncertainty over when this potential vaccine would be available, I’d now be more tempted to buy IAG shares at some point. Even so, I do still believe that the market has reacted slightly too positively to the vaccine news. On the back of its 40% rise, I’d therefore expect a short-term decline and would wait a little longer before buying.  

This travel stock is a quality operator

National Express (LSE: NEX) is the other travel stock that particularly interests me. While the coach operator has had a dismal 2020, this follows consecutive years of growth, leading to good consumer relationships and strong liquidity. Contracts with local authorities have also allowed the company to offset some of its losses. As such, the recent vaccine news looks capable of propelling National Express shares back towards its former glory, as already shown by a 26% increase yesterday.   

Of course, similarly to IAG, the most recent lockdown will have had a severe effect on the coach operator. I’d therefore continue expecting short-term pain for the FTSE 250 stock. But in the long term, I remain optimistic, especially in the light of vaccine news. As such, I’d buy this stock. Once again, I wouldn’t rush into buying, but would wait, in expectation of the market correcting itself over the next few days.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

Stuart Blair owns shares in National Express. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A couple celebrating moving in to a new home
Investing Articles

2 key stock picks for reliable passive income

I’m looking at stocks that can deliver reliable passive income to complement my growth picks, and I think I’ve found…

Read more »

A Rolls-Royce employee works on an engine
Investing Articles

In penny stock territory, is the Rolls-Royce share price set to soar?

The Rolls-Royce share price has sunk recently, falling into penny stock territory. But with flying hours recovering, is it too…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Lloyds shares drop 20% in 4 months. Should I buy now?

Lloyds shares have lost a fifth of their value since peaking on 17 January this year. But after rebounding from…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As the stock market recovery stalls, should I wait to buy?

Has the stock market recovery run out of steam? If so, what does that mean for our writer's portfolio? Here…

Read more »

Diagonal chain made of zeros and ones. Cryptocurrency and mining.
Investing Articles

At 55p, is the Argo Blockchain (LON:ARB) share price too cheap to miss?

With a low P/E ratio and strong financial results, could the Bitcoin miner be good value for money?

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here are 2 recession-proof FTSE stocks!

In the face of current economic uncertainty and fears of a looming recession, this Fool identifies two recession-proof FTSE stocks.

Read more »

British Pennies on a Pound Note
Investing Articles

Here is 1 penny stock primed to benefit from the construction boom!

Jabran Khan delves deeper into a penny stock that he believes could benefit from the construction boom, and explains why…

Read more »

Various denominations of notes in a pile
Investing Articles

Here is 1 top passive income stock to buy and hold!

Jabran Khan wants to boost his passive income stream through dividends and has identified this insurance giant as a way…

Read more »