Airbnb Poised to Rally as Travel Bookings Accelerate in U.S. and U.K. in 2021 - Gary Scott

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Airbnb Poised to Rally as Travel Bookings Accelerate in U.S. and U.K. in 2021 - Gary Scott
ENR Advisory Extra Report                                                            April 2021

Recent Decline in Stock Price is a Buying Opportunity as Americans Travel Again

Airbnb Poised to Rally as Travel Bookings
Accelerate in U.S. and U.K. in 2021
In 2007, a cash-strapped Brian Chesky came up with a shrewd way to pay his $1,200 San Francisco
apartment rent. He would offer “Air bed and breakfast”, which consisted of three airbeds, breakfast, WiFi
and a desk to work, to attendees of the Industrial Design Conference, who needed a place to crash over
the weekend. To fund this venture, the Mr. Chesky and his two co-founders created special presidential-
themed breakfast cereals. They sold 800 of these boxes at $40 each in two months. Afterwards, they
used their $30,000 in profits to start Airbnb, Inc. (NASDAQ-ABNB).

After an initial period of uncertainty, the company received $20,000 in seed funding from Y Combinator
and Sequoia Capital. The next year, it ran a Series A round which generated $7.2 million for the start-up.
Well, the rest as they say, “is history.” The company continued to raise capital and its valuation soared.
On December 9, 2020, Airbnb went public on the NASDAQ, surging 113% on the first day of trading and
giving the company stock market valuation of $47 billion.

The Airbnb website operates as an online marketplace for people who are looking for accommodations.
Airbnb connects travelers with Airbnb hosts who want to rent out their homes or other property. For
guests, Airbnb gives affordable temporary housing options and sometimes fun activities. For hosts,
Airbnb is a way to earn extra money. I made my first Airbnb rental reservation last week for a trip to
Miami next February; after a 13-month pandemic-induced hibernation at home in Montreal and a
curfew since January, I needed to plan a long overdue holiday. I booked a beautiful downtown Miami
apartment – far less expensive than a five-star hotel. I’ve already had numerous discussions with the
host of the unit, and I’m pleased with the level of communication and price.

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Airbnb Poised to Rally as Travel Bookings Accelerate in U.S. and U.K. in 2021 - Gary Scott
ENR ADVISORY EXTRA BULLETIN                                                                   2

Airbnb has grown at a remarkable compounded rate of 153% from 2009 to 2019. Airbnb makes money
by acting as the middleman between renters and Airbnb guests. Every time an Airbnb guest books the
host’s property, the Airbnb host pays Airbnb a fee. Airbnb also adds service fees depending on the total
cost of the guest’s stay.

Airbnb quickly attracted the attention of other companies, including investors. One year after its official
launch, the San Francisco-based company had over 2,500 listings and 10,000 Airbnb users. The firm
became instantly popular in Germany in 2011, serving as its launchpad for international users. In 2015,
Airbnb was the official supplier for the alternative accommodation services for the Rio Olympic Games.

For the past three years, Airbnb has consolidated its position in the market. It acquired Luxury Retreats
in 2017 for $200 million, followed by a $400 million acquisition of Hotel Tonight in 2019. Even with
these acquisitions, it is still considered a rather “light” asset company in comparison to its main rivals,
Expedia (NASDAQ-EXPE) and Bookings.com. (NASDAQ-BKNG).

As of March 29, 2021, the company fetches a $106.1 billion market capitalization. Though it lost money
in 2020, management believes it will turn profitable in 2022 or sooner. Airbnb suffered a big hit after
Covid-19 hit last year. At the pandemic peak, new bookings crashed 85%, although app usage has
gradually increased as countries have relaxed travel restrictions. Despite a $4 billion loss in the fourth
quarter, Airbnb posted revenue, bookings and room-night growth that beat expectations.

Countries with the most listings in Airbnb include the United States (660,000), France (485,000), Italy
(340,000), Spain (245,000) and the United Kingdom (175,000), according to iProperty Management.
And according to Stratosjet.com, the most popular cities for Airbnb rentals are Kissimmee, Florida; New
York City; Los Angeles; Davenport, Florida; San Diego; Atlanta; Miami; Panama Beach, Florida; Austin,
Texas; and Las Vegas. The most popular international Airbnb city is Vancouver.

Covid-19 Variant Risks

Airbnb should lead the travel recovery theme in 2021. U.S. domestic air travel is already almost at a pre-
pandemic peak as Americans hit the skies again with more than 1.5 million passengers clearing U.S.
airports on March 28, according to TSA. But a surge in infections of new Covid-19 variants across Europe
has resulted in renewed economic shutdowns. Markets worldwide have taken note; stocks and
commodities are wobbling over the past week while bond yields have declined after a big spike this past
winter. And the U.S. dollar, usually vulnerable amid a cyclical recovery, has rallied 4% off its multi-year
low in January. As a result, the travel recovery theme has declined about 10% to 15% over the past three
weeks; airlines, hotels and cruise lines are all off from post-March 2020 highs.

I am hopeful the global economic recovery will not be derailed by Covid-19 variants. Thus far, there are
no meaningful signs of spikes in infections in the United States, despite recent clusters of March break
parties in South Texas and South Florida. Second, continental Europe has lagged far behind the United
Kingdom and the United States in mass inoculations. Over 40 vaccines per 100 people have been
administered in the U.K. and the U.S. In France and Italy, it is 14 while barely 10 in Canada. However, if

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
ENR ADVISORY EXTRA BULLETIN                                                                     3

we study the resultant reopening in Israel recently, there is certainly hope for an economic recovery for
most advanced economies later in 2021 and 2022 once more vaccine supplies are delivered. Almost half
of all Israelis have received their first shot of Pfizer-BioNTech; confirmed Covid-19 infections are
literally falling to zero while very few cases of variants have surfaced.

Let’s face it: People are fed up with Covid-19. We are all fatigued. I have been extolling the arrival of the
biggest travel boom since 9-11. Travel focused investors have already missed the boat in the United
States and the United Kingdom with huge gains recorded in MGM Resorts International (current open
position in our portfolio since last November, +75%) and most other hotels, airlines, and cruise lines.

But Airbnb is not priced for a massive travel recovery in the United States this summer and fall. Bookings
are up, people are flocking to travel sites; Airbnb has said visits to its website have soared in recent
weeks. And some 61% of 2,200 Americans surveyed by Expedia Group Inc. said they were likely to make
a long-distance trip in the next year. Airbnb is poised to record big revenue gains as vacationer’s book
longer stays after suffering from ‘cabin fever’ for the past year, mainly in the United States. Summer peak
travel season is upon us. It is time to book a stay.

BUY Airbnb, Inc. (NASDAQ-ABNB) at market up to $199.

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
ENR ADVISORY EXTRA BULLETIN                                                                   4

Inflation-Nation Ahead?
Adjusted for inflation, average weekly earnings for production and nonsupervisory workers peaked in
the early 1970s. But markets have grown increasingly obsessed with inflation as break-even rates on
TIPS, commodities and massive U.S. fiscal deficits portend to a new secular period of rising prices. I am
not convinced. At least not yet. We need to see a significant increase in wages first. There remains a lot
of slack or unused capacity in the world economy. U.S. factory capacity utilization sits at just 71% --
significantly below the five-year average of 75.4% recorded from 2015 to 2019; the United States and
the rest of the world have yet to replace the tens of millions of jobs lost after March 2020. It is hard to
see a big spike in inflation without job gains, rising real wages and a concerted global economic recovery.

Unlike the rampant inflation of the 1970s, there is one major critical difference today compared to the
high inflation period more than forty years ago: China and other manufacturing countries. The rapid
industrialization of China since 1978 and other emerging markets since the late 1980s have created a
phenomenon in pricing called disinflation or in some cases, deflation. China was not a major economic
powerhouse in the 1970s and certainly not a major exporter to the world. The advent and acceleration
of Chinese exports has resulted in a deflationary environment for goods the last 20 years. You could say,
for example, that technology is deflationary because it makes jobs increasingly redundant, lowers
workers’ compensation and leads to more productivity.

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
ENR ADVISORY EXTRA BULLETIN                                                                     5

Inflation, of course, is everywhere outside of the official government consumer price index (CPI). College
tuition, healthcare costs, home construction and purchase prices, most services and big-ticket items are
always rising. About the only things not increasing are consumer electronics. It makes you wonder what
planet the government is living on when they report a CPI, excluding food and energy. How does
someone live without food and energy?

If inflation makes a big advance, we can look to the 1970s as a reference point for asset allocation. Please
see chart on page 4, courtesy of Liz Ann Sonders at Charles Schwab. This capsule is a nominal return
survey, not adjusted for inflation. The returns are much less after inflation. In the 1970s, U.S. annual
inflation averaged 6.8%, double the long-term average.

No surprise that gold and commodities dominated the performance in the ‘70s amid a plunging dollar
following Nixon’s termination in 1971 of Bretton Woods (dollar convertibility to gold), soaring deficits
largely due to the Vietnam War and LBJ’s Great Society programs. I did, however, find it interesting how
value-based equities outpaced growth stocks that decade by a considerable margin. But after inflation
of almost 7% per annum in 1970s, an investor lost real purchasing power in everything else, especially
bonds, cash, the S&P 500 Index, and small stocks.

One asset class not reviewed on page 4 is U.S. residential real estate, which surged a nominal 172% from
Q4 1969 ($27,100 = average home price) to Q1 1980 ($73,600), according to the St. Louis Fed.
Residential housing outpaced other major asset classes in the 1970s after inflation, except gold and
commodities.

As for an ideal inflation hedge, I stand by gold bullion. Gold’s recent price action amid rising fears of
inflation this year remains an enigma; many inflation sensitive assets have rallied. Bullion is down a
cumulative 19% since hitting an all-time high last summer. More than any single variable – outside of
market manipulation – the gold price might be falling because the dollar has recovered sharply over the
past six weeks. Rising rates do not necessarily hurt gold; I find that to be a poor excuse for declining gold

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
ENR ADVISORY EXTRA BULLETIN                                                                  6

prices. In the late 1970s, U.S. interest rates went through the roof before topping out above 20%, and
yet gold blasted higher to $850 an ounce. Rates are simply too low to make a serious dent to gold prices.
If we have a real acceleration in inflation, gold prices will skyrocket.

Furthermore, the unprecedented size of U.S. fiscal deficits is a serious cause for concern. It is the same
with the ECB, Bank of Canada, Bank of England, Bank of Japan etc. If you are a dollar-based investor, the
threat of inflation is real because the Fed will continue to monetize a larger percentage of Treasury debt
issuance.

As deficits grow, the Fed will absorb what is necessary. The Biden administration is a strong proponent
of Modern Monetary Theory (MMT), which advocates spend, tax, and borrow in a fiat currency
controlled by the government, believing it is not financially constrained by money-printing limitations.
I highly disagree. I think we have started a new chapter on government spending, and it will ultimately
end badly with inflation and a devalued dollar. Buy gold as a hedge against government profligacy.

ENR Advisory Portfolio

Value Trounces Growth in 2021
As of March 30, the MSCI World Index has gained 4.5% in 2021 and the S&P 500 Index is up 5.7%. The
first quarter will likely be a strong three-month period for most risk assets, except fixed-income
securities, precious metals, foreign currencies, and growth stocks, including Big Tech. Value-based
equities in the United States outpaced growth stocks by the widest margin in decades in the first quarter
with the Vanguard Value ETF (NYSE-VTV) rising 11% compared to a 0.6% gain for the Vanguard
Growth ETF (VUG). Market leaders Apple, Inc. (-10%), Amazon.com (-7%) and Tesla (-13%) have pulled
back over the past 90 days.

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
ENR ADVISORY EXTRA BULLETIN                                                                  7

Market leadership continues to favor economic recovery stocks like cyclicals, industrials, financials, and
materials. The energy sector, last year’s biggest loser, has surged 31% this year. Dow Theory has also
turned bullish again. The Dow Jones Transportation Average has repeatedly hit fresh all-time high lately
and is up over 16% in 2021 while the Dow Jones Industrials does the same. When both averages are
hitting new highs, that is a positive sign for the economy and the market.

In USD terms, the S&P 500 Index is dominant in 2021. Non-U.S. markets have retraced some of their
gains over the past several weeks amid dollar strength. The MSCI EAFE Index (major markets, ex. USA)
has rallied 3.3% this year and the MSCI Emerging Markets Index is up 1.5%. The top performing markets
in dollar terms include Chile (+14%), South Africa (+11.4%), Taiwan (+10%), Singapore (+9.7%), and
Canada (+8.5%). It is no surprise that most of this year’s leading bourses are natural resource-based
economies.

The ENR Advisory Extra Portfolio posted mixed results since our last update with most non-U.S. stock
ETFs, financials and industrials posting gains but technology stocks correcting sharply, especially
Chinese tech companies.

In March, Chinese technology shares dropped sharply on growing concerns of possible de-listings from
U.S. exchanges and reported plans by Beijing to take control of companies’ user data. The S&P/BNY
Mellon China Select ADR Index that tracks 48 major U.S.-listed Chinese companies is 23% below its
record on February 16. In addition to facing more scrutiny at home, investors have rotated out of growth
stocks and into value shares in 2021. We hold two tech-focused Chinese securities in the model portfolio.
The Invesco China Technology ETF plunged 17.5% since our last update and Alibaba Group Holdings
has dropped 6%. Sell CQQQ or the Invesco China Technology ETF.

Also this month, we are selling the CurrencyShares Japanese Yen ETF, down more than 6% this year
as the dollar hits a 12-month high vis-à-vis the yen.

In April, we are buying Airbnb, Inc. (NASDAQ-ABNB) up to $199. More Americans are traveling this
spring whether by air or automobile. That trend will continue to gain traction as more people are
vaccinated and warmer weather arrives. Airbnb is a great long-term growth story at this price following
a correction in the IPO price last December.

Other travel-related names have also pulled back, including Melia Hotels International (Madrid-MCE).
Spain will recover and see a boom in travel later this year and into 2022. Melia is cheap.

2MX Organic SA, a SPAC traded in Paris and headed by three experienced French entrepreneurs, is
down 10% from my first buy recommendation in February. The EUR has also declined. SPACs, in general,
have consolidated heavily in the United States since early March amid a risk-off environment and rising
bond yields. I remain bullish on 2MX because it is managed by successful French businessmen
specializing in food and retail. Management seeks to buy and grow organic food distribution centers
across Europe. This European SPAC has about €300 million in cash awaiting to make a deal with one
or more companies in the European organic foods sector. BUY up to €11.25.

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
ENR ADVISORY EXTRA BULLETIN                                                                                8

The travel recovery theme has rallied hard over the past several weeks as more vaccines roll-out,
especially in the United States and UK. Airlines, cruise lines, hotels and restaurants have gained
considerably. In Europe, hotels and airlines have also posted big gains; our open position in Spain’s
Melia Hotels has rallied almost 25%. And Boeing Co., which I consider a ‘recovery play’ on travel, is up
almost 10% since January 5th. The best of the bunch is MGM Resorts International, up 77% since
November 3rd. I am placing this theme on HOLD until a new buying opportunity emerges.

What’s Included in This Service
As part of the ENR Advisory Extra package, you are entitled to the following services. We highly
recommend our clients take advantage of these services to better implement your long-term investment
goals and risk objectives:

     •    Quarterly portfolio/account review
     •    Portfolio planning and future projections
     •    Automatic portfolio rebalancing
     •    Tax-loss harvesting advice

Please call our office in Montreal and make an appointment with Eric. Telephone (Toll-Free) 1 877 989
8027 or email Dugald Malcolm at dugald@enrasset.com.

------------------------------------------------------------------------------------------------------------------------

Eric N Roseman
Montréal, Canada
March 30, 2021

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
ENR ADVISORY EXTRA BULLETIN                                                                                         9

                                                     Entry                           Current        Current      Gain/
 Security                  Listed       Symbol                       Date                                                  Advice
                                                     Price                           Yield          Price        Loss
 Airbnb                    NASDAQ       ABNB             $174.40     Mar 26/21         0.00%          $174.40       NEW    BUY
 Iberdrola                 Madrid       IBE               € 10.40    Mar 1/21          3.83%           € 10.98     3.42%   BUY
 2MX Organic               Paris        2MX               € 10.70    Feb 8/21          0.00%            € 9.90    -9.48%   BUY
 Meliá Hotels
                           MCE          MEL                € 5.57    Jan 5/21          0.00%            € 6.34     9.24%   BUY
 International
 WisdomTree
 Chinese Yuan              NYSE         CYB               $26.10     Oct 1/20          0.41%           $27.20      4.64%   BUY
 Strategy Fund
 Morgan Stanley
 Global Franchise          NASDAQ       MSGFX             $25.34     Jun 4/19          0.00%           $30.33     19.69%   BUY
 Portfolio C*
 Gold Bullion              Unlisted     N/A            $1,492.47     Jan 4/16          0.00%         $1,732.52    16.08%   BUY
 Invesco China
                           NYSE         CQQQ              $54.99     Mar 2/20          0.41%           $81.25     48.46%   SELL
 Technology ETF
 CurrencyShares
                           NYSE         FXY               $88.45     Sep 6/16          0.00%           $86.00     -2.77%   SELL
 Japanese Yen ETF*
 MercadoLibre              NASDAQ       MELI             $297.43     Jul 4/18          0.00%         $1,431.97   381.45%   HOLD
 Microsoft Corp.           NASDAQ       MSFT             $101.27     Dec 21/18         0.90%          $236.48    138.50%   HOLD
 Berkshire
                           NYSE         BRK.B            $125.79     Feb 9/16          0.00%          $256.77    104.13%   HOLD
 Hathaway Class B*
 Target Corp.              NYSE         TGT              $107.91     May 1/20          1.34%          $200.95     88.72%   HOLD
 MGM Resorts
                           NYSE         MGM               $21.52     Nov 3/20          0.03%           $37.68     75.11%   HOLD
 International*
 B2Gold Corp.              NYSE         BTG                  $2.73   May 30/18         3.07%             $4.56    72.16%   HOLD
 iShares Currency
                           NYSE         HEWJ              $24.65     Sep 6/16          1.15%           $39.46     69.02%   HOLD
 Hedged MSCI Japan
 iShares MSCI South
                           NYSE         EWY               $59.31     Jul 2/19          0.71%           $89.14     53.56%   HOLD
 Korea Capped ETF
 Silver Bullion            Unlisted     N/A               $16.46     Jul 30/19         0.00%           $25.06     52.25%   HOLD
 Euronet
                           NASDAQ       EEFT              $94.20     Aug 3/20          0.00%          $140.91     49.59%   HOLD
 Worldwide, Inc.
 Vanguard FTSE
                           NYSE         VWO               $38.28     Dec 21/18         1.82%           $51.90     42.69%   HOLD
 Emerging Markets
 SPDR S&P Global
 Natural Resources         NYSE         GNR               $36.35     Jun 29/20         2.54%           $50.93     42.21%   HOLD
 ETF
 iShares MSCI
 Global Gold Miners        NASDAQ       RING              $22.01     Jul 30/19         0.95%           $27.57     26.62%   HOLD
 ETF
 Groupe Bruxelles
                           BSE          GBLB              € 77.04    Jun 4/20          2.83%           € 88.20    19.87%   HOLD
 Lambert
 Credit Suisse
                           NYSE         CS                $10.98     Sep 2/20          2.32%           $12.87     18.60%   HOLD
 Group AG
 The Boeing
                           NYSE         BA               $208.38     Jan 5/21          0.84%          $244.87     17.51%   HOLD
 Company
 Alibaba Group
                           NYSE         BABA             $194.57     May 1/20          0.00%          $227.26     16.80%   HOLD
 Holdings*

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
ENR ADVISORY EXTRA BULLETIN                                                                                                                                10

  Cambria Tail Risk               CBOE
                                                   TAIL                   $20.66        Dec 4/20              0.37%               $18.91          -8.41%        HOLD
  ETF                             BZX

Risk Disclaimer: The financial information provided in this Bulletin is accurate at the time of publication to the best of ENR’s knowledge. Recipients are advised that the
financial data provided is subject to constant change. Recipients are also made aware that investments in single stocks and bonds are a high-risk pursuit that could
result in a high or even total loss of invested capital. Investments in foreign currencies and securities should also be considered a high-risk venture, as the currency
might drop in value compared to the US dollar and political, or country-specific factors, might endanger the liquidity and/or value of the security. Investing in securities
has definite tax consequences, some of which may be dependent on a security’s type, its country of issue or the form of its income streams. ENR does not provide legal or
tax advice nor accepts any such liability. Clients should always consult a professional regarding specific legal or tax matters. *ENR or its employees or its access persons
own shares of Berkshire Hathaway Class B, MGM Resorts International, 2MX Organic SA, Boeing Co., and Morgan Stanley Global Franchise Portfolio C.

ENR Asset Management Inc. • 1 Westmount Square, Suite 380 • Westmount, Quebec • H3Z 2P9 Canada
Phone 1-514-989-8027 • Fax 1-514-989-7060 • Toll free 1-877-989-8027 • www.enrassetmanagement.com
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