Best Travel and Leisure ETFs
Travel stocks were among the best-performing companies last year, with the sector up about 27%, according to Skift Research’s Skift Travel 200 Index. It is a broad category that includes companies in the leisure and entertainment industries as well as hotels, airlines, cruises and travel, travel technology, ground transportation and other related categories.
The outlook for travel and leisure stocks is generally pretty good this year as demand remains high. But finding the right stock in the right sector of this wide world isn’t always easy. Nonetheless, a great way to capitalize on this area of the market is through exchange traded funds (ETFs). Because there are several that focus on these industries. Here are two of the best.
Defiance Aviation, Hotels and Cruise ETF
As the name suggests, Defiance Airlines Hotel & Cruise ETF (NYSEARCA:CRUZ) invests in airline, hotel and cruise ship stocks through the BlueStar Global Hotel, Airline and Cruise Indexes. Although this fund is relatively new, having only been around since 2021, it has already amassed the equivalent of $39 million in net assets.
These indices and funds include stocks of companies around the world that derive at least 50% of their revenue from the passenger airline, hotel and resort, or cruise industries. No one of these three industries can have a weighting greater than 50% or less than 15%, and no individual stock can exceed 8% of the portfolio, ensuring proper diversification.
The top three holdings in the current portfolio are Marriott International (NASDAQ:MAR), Hilton Hotels (NYSE:HLT), and Royal Caribbean (NYSE:RCL). The portfolio includes 55 global stocks.
The ETF doesn’t have a long track record, but it is up 35% in 2023. Since its launch in June 2021, it has fallen 10% as of December 31. However, this covers two of the most difficult years for the travel industry in recent history, so the ETF should have some momentum as travel demand grows again. to pre-pandemic levels.
Invesco Leisure and Entertainment ETF
After debuting in 2005, Invesco Leisure and Entertainment ETF (NYSEARCA:PEJ) has the distinction of being one of the first ETFs to track stocks in the travel, entertainment, and leisure industries. Previously known as PowerShares Dynamic Leisure and Entertainment ETF and Invesco Dynamic Leisure & Entertainment ETF, the fund tracks the Dynamic Leisure & Entertainment Intelledex index, which consists of stocks of 30 U.S. leisure and entertainment companies.
Companies included in the index are primarily engaged in the design, production and distribution of goods or services in the leisure and entertainment industries. This may include hotels, restaurants, bars, cruise lines, casinos, and other recreational and entertainment businesses. It may also include companies engaged in film, music, radio, television, and theater production.
Stock selection and weighting are based on specific investment criteria including price momentum, earnings momentum, quality, management action and value. The top three holdings currently are Royal Caribbean Cruises, Warner Music Group (NASDAQ:WMG), and Marriott.
The ETF returned 16.4% in 2023 and has outperformed some of its peers during the pandemic, with a five-year average annual return of 2.2% through December 31. Since its inception in June 2005, the fund has delivered average annual returns. 7.3% return. This is roughly similar to the S&P 500 over the same period.
Although the travel industry has gone through difficult times over the past few years, the resurgence that began in 2023 is expected to continue until 2024, making these travel and leisure ETFs worth considering.
disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.
