Hospitality Stockwatch – February 2024

Arun Upneja, Ph.D. MBA, Dean, Boston University School of Hospitality Administration
Steve Kent, Ph.D., CFA, Assistant Professor, Molloy University-School of Business

January results for the market reminded us that “the trend is your friend,” meaning what worked for the latter half of 2023 is continuing into the first month of 2024. The Magnificent Seven, Google parent Alphabet, Apple, Meta Platforms, Microsoft, Amazon, Tesla, and NVidia continued to lead the way in early January. But all is not perfect in the way of mega-cap stocks as we have seen some “sell on the news” as solid, beats, and in-line earnings, sending these stocks modestly lower as they report Q4 earnings. 

Responding to the question of how our stocks are doing to start the year, the short answer is not that great. In January, only 4 of the 18 subsectors we examined outperformed the broader S&P500. Only a few have reported their earnings for the last quarter of the year, so the focus will be on the first full week and second week of February when Hilton, MGM, Marriott, Hyatt, Wyndham, McDonald’s, and others will start to report. Another measure of consumer trends will be later in February and early March when the major retailers start to report their FY (1/31/24). 

Hospitality investors know how “Black Swan” or outlier events, as described in Nicolas Taleb’s book, The Black Swan, that can impact results and share performance (Taleb, 2010). But increasingly investors are concerned about a “White Swan,” a problem that is in plain sight and should not surprise anybody. Taleb and others have recently indicated that the growing US Budget Deficit is a White Swan that will cause problems if we don’t start to increase taxes and reduce spending. A high budget deficit, in essence “kicks the can down the road” to another generation who will have to pay down the bills we incurred. Having to pay down debt could slow growth in the future as more capital goes to reduce the deficit rather than focusing on growing.  

Winners and Losers
Some of the biggest losers in the past 30 days were Spirit Airline down over 60% (concerns about JetBlue deal), AMC down 34% (share dilution and weak movie premiers), and Hertz down 20% (partial exit from electric vehicles). Winners were Selena up 68% (low stock price/capital raise) along with online gaming companies Draft Kings, up 16%, and Rush Street 24%. 

Click here to download Hospitality Stockwatch – Current as of February 1, 2024

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