Almost all stocks were impacted as the coronavirus crisis started last year, but some were more affected than others, like travel stocks. They are still struggling to get back on their feet, but I reckon these reopening stocks are in for much better times.
FirstGroup makes gains
Consider transport operator FirstGroup (LSE:FGP), which is one of the biggest FTSE 250 gainers so far in today’s trading, with a gain of 5.7%. In early trading today, it had risen by as much as 19% as it decided to sell-off two North American bus operations.
With this move, the company is expected to reduce debt and even pay off the UK government’s coronavirus aid. The fact that this has been well-received by investors indicates that debt is likely an important issue on their minds at present. And that proactive measures to deal with it are well-rewarded.
I think as vaccinations progress even further and the lockdown is relaxed completely in the UK, where FirstGroup has train contracts, its financials will start looking up even more.
At present, it is still a penny stock, trading below early-2020 levels. I reckon that can change now. I would keep in mind, however, that even FirstGroup has been loss-making for the last three years. The Covid-crisis has weakened it further, so it remains to be seen whether the gains will be sustainable.
Go-Ahead group shows improvements
Instead, I would consider the Go-Ahead Group, which is in pretty much the same boat as FirstGroup. Its share price too, is below early-2020 levels as its operations have been impacted.
But there is a difference here. Not only is it profitable, as per the latest half-year numbers, it expects earnings to increase. I think that between the two stocks, Go-Ahead Group currently looks like a better investment to me.
National Express is a reopening stock to note
National Express is another travel stock I expect can rally from its current levels. Its share price trajectory is similar to both that of FirstGroup and Go-Ahead Group.
While its earnings too have been impacted by the pandemic, it did report recovery for the beginning of 2021. I also like that it is diversified not only across Europe, but has operations in the US as well.
As economic recovery, and even a boom, is expected in countries like the US and the UK, National Express can make rapid gains.
A point to note
The one big challenge that I do see to travel stocks, however, is that the pandemic is not over. There is an increasing number of variants, more doses of vaccines are said to be required now, and vaccine efficacy has also come under question.
We cannot say for sure that travel will be back with a bang. In the UK, the government has attributed a fall in Covid-19 cases to the lockdown and not just vaccinations.
In this scenario I like FirstGroup’s prudent approach of getting out of debt. But in terms of performance, Go-Ahead and National Express are my sure shot buys.
Manika Premsingh owns shares of National Express Group. 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.