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24 Feb 2021

Beyond Tourism: Unlocking the COVID Cage

Vaccines will unlock COVID cages and Luxury Consumers will roam free again.

Beyond Tourism: Unlocking the COVID Cage

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Vaccines will unlock COVID cages and Luxury Consumers will roam free again.

COVID recovery stocks have been enjoying a second wind in December 2020 and early 2021, after their first wind when vaccines were announced at the start of November 2020. The Dominion Funds have steadily increased exposure to these companies since the market lows of early 2020.

The Travel and Tourism sector has now captured the attention of investors as a potential source of strong returns in 2021 driven by a vaccine-led recovery. At the same time, many of the ‘COVID winners’, stocks that outperformed last year during the pandemic, have seen weaker short-term price performance.

Our focus, whether COVID winner or recovery stock, is that growth be underpinned by a long-term secular trend and the valuation of the company is reasonable.

Few things are as endemic to British culture as pubs. Now the UK Government, which ranks as one of the worst for managing the initial pandemic response and one of the best for securing and distributing the vaccine, has provided its population with a staggered timetable for the complete removal of COVID restrictions, including the much-anticipated reopening of pubs.

Suddenly and uncharacteristically, optimistic Brits have been rapid in their response, booking up restaurants and pubs. Within hours of the announcement low-cost airline EasyJet saw its sales more than quadruple and package tour operator TUI saw bookings jump sixfold.

This is a strong example of the pent-up demand for leisure and tourism services after months of lockdown, one that will not be unique to Britain. As the COVID recovery steadily kicks into gear, we expect to continue to see this pent-up demand drive a strong recovery in demand for COVID-safe travel and tourism worldwide.

Disclaimer

The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.

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