Investors who recognize that the recession ahead will not hurt all sectors will come out ahead. Airlines
have the strong pricing power to pass higher prices to travelers. Similarly, people who missed vacations
on cruise ships due to the pandemic will reserve a spot. Although firms in those two sectors have high
debt, investors might bet that their cash flow will improve.
Delta Airlines (DAL) posted revenue growing by 11% year-on-year. Its operating earnings topped $1.5
billion. The airline earns revenue from its partnership with American Express (AXP). In the current
quarter, the holiday season will drive travel volumes higher. DAL stock should trend higher from here.
Carnival (CCL) closed near its lows recently. The cruise ship company has a debt/equity of 4.07 times.
Expect Carnival, Norwegian Cruise Line (NCLH), and Royal Caribbean (RCL) to increase bookings.
Outside of the travel industry, automotive stocks might attract betters. The big ticket items are less
affordable when inflation rises. Disposable income hurts purchasing power. However, Ford (F), General
Motors (GM), and Stellantis (STLA) limited output. The supply chain and chip shortage limited vehicle
availability.
Automotive firms may charge a premium to those who can afford it. Bet on profit margins expanding
despite the recession.
