Millions of Americans flocked to high-visibility locations on Aug 21 to catch a glimpse of the first solar eclipse in 99 years to cross the entire U.S. continent.
Stock markets have historically gained momentum after such solar eclipses. Such a once-in-a-lifetime event provides great business opportunity to travel and leisure companies. This calls for investing in solid stocks from such areas.
Stocks Rally on Solar Eclipse
LPL Financial senior market strategist Ryan Detrick stated that “history has shown us that since 1900, any time a total solar eclipse has been seen in the U.S., equity prices have gone up”. According to him, one year after the last 15 other total solar eclipses visible in the U.S., equity prices have gained an average of 17.2%. Stocks have, in fact, gained a whopping 39.6% after the eclipse in June 1954, while the markets rallied nearly 32% after one eclipse in June 1918.
Detrick also figured out that the broader markets tend to rise an average 0.9% in the month following an eclipse, while it climbs 7.2% over the next six months. On a lighter note, he added that “it appears our biggest worry isn’t what stocks might do, but whether those glasses we bought online are officially approved by NASA!”
Of course, there are other drivers that correspond with the solar calendar including robust quarterly earnings and economic conditions gaining traction at a steady pace. The Q2 earnings season has almost come to an end, with 474 S&P 500 members having reported quarterly results so far. Total earnings for these companies are up 10.6% from the same period last year on 5.6% higher revenues, with 74.9% beating EPS estimates and 68.4% surpassing the revenue mark (read more: No Shortage of Positive Retail Sector Surprises).
Americans, in the meanwhile, have spent more in the spring driving the U.S. economy beyond the $19 trillion mark for the first time. Real gross domestic product rebounded in the second quarter and more than doubled from the preceding quarter (read more: US GDP Crosses $19TN for the First Time: 5 Best Gainers).
Here is LPL’s full breakdown of past performance, post-eclipse:
|Date of Eclipse|
Solar Eclipse Gives Public Companies Hopes of Better Business
As the total solar eclipse bisected the United States on Aug 21, some of the firms are expected to benefit immensely. CEO and COO Larry D. De Shon of car rental company, Avis Budget Group Inc. (CAR - Free Report) said that eclipse helped push rental prices higher. Maven, the on-demand car sharing brand from General Motors (GM - Free Report) , had offered a $10 discount code ECLIPSE for travelers to move towards the eclipse lookout point. And with millions of Americans hitting the road to catch a glimpse of the once-in-a-century solar eclipse, such a move will surely lift the company’s margins.
Financial and bank holding company, First Interstate Bancsystem Inc (FIBK - Free Report) has more than 120 offices in the states of Idaho, Montana, Oregon, South Dakota, Wyoming and Washington. These are some of the key states that experienced the total solar eclipse and with millions flocking to these states, the bank’s business will surely get a shot in the arm.
Many brands also geared up to cash in on this rare event. Royal Caribbean Cruises Ltd RCL aptly named its cruise Total Eclipse, where Bonnie Tyler sang “Total Eclipse of the Heart”. And for those who haven’t traveled, Discovery Communications Inc’s DISCA Science Channel gave live eclipse coverage all through the day.
Solar Eclipse a Bonanza for Airlines, Hotels
Airlines have largely benefitted from this once in a lifetime event, as many traveled to large parts of the country that are typically rural regions and don’t see much tourist traffic. In fact, Alaska Airlines (ALK - Free Report) organized for invitation-only flights for “astronomy enthusiasts” who wanted a sighting of the eclipse in the skies. Southwest Airlines (LUV - Free Report) also earmarked certain flights that helped travelers view the eclipse from high above the clouds.
CNBC’s Eric Chemi noted that hotel bookings in some parts of the country, which were mostly along the eclipse path, skyrocketed 400%. Representatives from online marketplace and hospitality service, Airbnb declared that the site logged more than 40,000 guest bookings as of Jul 31.
Many hotel chains like Marriott International Inc (MAR - Free Report) offered packages to commuters who head to cities in the path of the eclipse. The company reported that the number of rooms booked in 16 locations was up 60% from last year. Hilton Worldwide Holdings Inc (HLT - Free Report) is another firm that tried to entice customers with special offers, while InterContinental Hotels Group PLC (IHG - Free Report) , another large hotel chain, said last month that two of its three Nashville, Tennessee, hotels were sold out.
Top 5 Winners
With solar eclipse primarily being a boon for airlines, cruises and hotel industries, investing in fundamentally sound stocks from such areas seems prudent. We have, thus, selected five stocks from such areas that flaunt a Zacks Rank #1 (Strong Buy) and 2 (Buy).
SkyWest, Inc. (SKYW - Free Report) , through its subsidiaries, SkyWest Airlines, Inc. (SkyWest Airlines) and ExpressJet Airlines, Inc. (ExpressJet), operates regional airline operations in the United States. SkyWest has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings increased 1.9% over the last 60 days. The company is expected to yield a positive return of 9.2% and 24.7% in the current and next quarter, respectively.
Royal Caribbean Cruises is a global cruise vacation company that operates Royal Caribbean International, Celebrity Cruises, and Royal Celebrity Tours. Royal Caribbean Cruises has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 3.2% over the last 60 days. The company is expected to give a positive return of 8.1% and 3.4% in the current and next quarter, respectively.
Marriott Vacations Worldwide Corp (VAC - Free Report) focuses on vacation ownership, based on number of owners, number of resorts and revenues. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings increased 3.6% over the last 60 days. The company is expected to give a positive return of almost 24% in the current quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hilton Grand Vacations Inc (HGV - Free Report) is a timeshare company that markets and sells vacation ownership intervals (VOIs), manages resorts in leisure and urban destinations, and operates a points-based vacation club. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 3.7% over the last 60 days. The company is expected to give a positive return of 35.1% in the next quarter.
Red Lion Hotels Corporation (RLH - Free Report) is a hospitality and leisure company. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 5% over the last 60 days. The company is expected to give a positive return of 7.5% in the next quarter.
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