The economic outlook remains fraught with danger as the Covid-19 crisis rolls on. But that hasn’t stopped investor interest in ‘reopening’ stocks from spiking in recent weeks. As the name suggests, these are the sorts of UK shares which will likely benefit from coronavirus lockdowns and travel restrictions ending.
Of course, UK share investors like me need to be careful before splashing the cash on these reopening stocks. The battle against Covid-19 on these shores is heading in the right direction, thanks to the swiftness of vaccine rollouts.
But the birth of virus variants mean infection rates are rising in other parts of the world. And this is derailing hopes of profit rebounds for many companies and putting balance sheets under fresh pressure. A third wave of infections could well emerge on these shores too.
But with some diligent research it’s possible to buy sensibly for the eventual reawakening of the global economy. Many top UK shares have the balance sheet strength to weather a Covid-19 crisis that could stretch well into the second half of 2021. They also retain strong profits outlooks on a long-term basis, meaning shareholders can likely expect to enjoy solid returns later this decade.
A ‘reopening’ stock on my ISA watchlist
Hopes of a sudden bounceback in the broader European aviation sector are looking pretty shaky right now. Lockdowns and travel restrictions are back in vogue on the continent’s mainland as Covid-19 cases soar again. But I don’t think long-term investors like me should give this embattled sector a complete miss.
Some airlines like Wizz Air Holdings (LSE: WIZZ) are in great shape to fly through the crisis. Okay, this FTSE 250 operator has seen ticket sales fall off a cliff over the past year. It saw passenger numbers collapse almost 90% year-on-year in February. But the business still has plenty of financial legroom to help it overcome the current downturn (it had cash of €1.2bn on its books as of January). This is why I’m thinking of buying it for my own Stocks and Shares ISA today.
A UK share for big long-term returns
Wizz Air is one of the fastest-growing airlines in Europe thanks to aggressive expansion and its focus on increasingly-wealthy emerging markets. It can look forward to significantly growing its market share following the pandemic too. Certainly given the large number of aviation casualties that are likely to transpire.
That’s not to say Wizz Air doesn’t have risk of course. ING Bank reckons that tough industry conditions will continue “at least in the first half of 2021” as the pandemic rolls on. And its analysts reckon that “business travelling is likely to return at a much slower pace as digital meetings, conferences and remote working will continue for some time.”
That said, I still think the Wizz Air share price merits serious attention following its heavy fall from recent record highs. I think it’s a reopening stock that could make UK share investors a shedload of cash during the 2020s.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. 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.