It’s summer. That’s no reason to buy into companies that rely on summertime, but it might be a good time, while the sun shines to at least do some research.
Summertime: and investin’ is easy!
Ella Fitzgerald sang: “Summertime, and the livin' is easy”. Well, there are two regions of the world that jump into my mind that have been especially popular with those who want easy livin’ this summer: Cornwall and Mykonos. One has benefited from great promotion that has been the worldwide hit Poldark and the scorching summer, the other place is where the beautiful people go.
But what about investing?
A number of factors have been at play affecting the tourist industry. The continuing fortunes, or is that misfortunes, of the pound, are making holidays abroad especially expensive. This in turn has benefited the UK tourist industry. But this has already been priced in by the markets. If we see continued problems for the pound, then the likes of Thomas Cook may lose out.
So, watch Brexit negotiations ‐ if we end up with a no deal, in theory that should be bad for the pound ‐ although, you know what they say: ‘buy/sell on rumour, sell/buy on news’. The biggest turbulence related to sterling and stocks whose performance are sterling related, might be during the build‐up to Brexit. Once we leave, and fact replaces conjecture, it might be a good time for a contrarian investment.
But the cheap pound is good for companies that cater for the UK’s domestic tourist industry.So, travel companies that, for example, fly people into the UK, or sell holidays in the UK, should benefit. And for international firms that sell to both holidaying Brits abroad and people holidaying in Britain, the overall effect might be neutral.
Other factors at play that have been hitting the industry, include the crisis in Turkey ‐ although the collapse in the Turkish currency does rather make the country look cheap. Not sure what the prognosis is, longer term however – once Trump has finished and if Mr Erdogan carries on pushing the economic accelerator. I fear for this region. Looking beyond equity investing, if I was considering a property investment in Turkey, I might be attracted by the lower prices created by the falls in the currency, but fret about possible political instability.
The other, ever present, concern is terrorism.
TUI, listed by The Share Centre as a buy, has seen its share price struggle, with the heatwave, strikes and the crisis in Turkey getting the blame.
Even On The Beach ‐ which had seen its share price treble during the five year period to April, has fallen by a third since the beginning of May.
The reasons for the rises and falls at each company are not identical – but the underlying factors are.
I seem to recall that the summer of 1976 was followed by a very cold year. Currency turbulence is not forever, in theory things should settle down and share prices that suffered for transitory reasons should recover.
I wonder, however, whether climate change is finally exerting itself on the summer weather – if it is, traditional Mediterranean hot spots that draw in tourists every year might become unbearable. Cornwall, with or without Ross Poldark and other touristy regions in Northern Europe may become more popular.
But to reiterate my view above and to quote from Ms Fitzgerald, of shares that have fallen for transitory reasons “So hush, little investor, don't you cry.”
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees