Why you can't afford to ignore travel and tourism stocks

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Global market movements have been keeping investors on their toes, but across the board, indicators are showing the global economy continues its recovery.

The S&P500 (which tracks the biggest 500 companies in the US) and Nasdaq Index (which tracks all stocks listed in the exchange) has continued to grind higher, both reaching new records in the past few days.

Locally, the ASX200 continues to sit just below record-high territory. As we enter the new financial year and look ahead to the upcoming reporting season, there is plenty to feel positive about amidst the ongoing uncertainty and market fluctuations.

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With all this in mind, let's take a look at three key insights for the coming month.

Travel and tourism to thrive

Despite the imminent unpredictability, opportunistic investors with a long-term view simply cannot ignore travel and tourism stocks.

Last week, the industrials sector (which includes a number of companies exposed to the travel and tourism sector) outperformed the broader ASX200, with investors rallying behind the Sydney Airport (ASX:SYD) bid and Auckland Airport (ASX:AIA) as NZ opened its travel bubble to South Australia, ACT, Tassie and Victoria. Investors are looking beyond the current lockdowns in some ways, looking to the future and pre-empting what companies like these will look like post covid.

Confidence is starting to build in the sector - and with good reason. From July 19, Australia is set to get triple its weekly Pfizer supply, with 1 million doses per week for two months. This will help scale up the nation's rollout which currently lags the rest of the world.

The successful vaccine rollout across the United States and Europe has seen research house FactSet predict that industrials sectors in these regions will see the second strongest revisions and upgrades to earnings per share (EPS) this year.

If Australia follows in the footsteps of other countries and eases border restrictions once people are vaccinated, investors can expect the Australian industrials sector, and other stocks exposed to travel and tourism, to also see a strong kick.

There are plenty of short-term headwinds but with a patient longer-term view, you could consider boosting exposure to companies with strong balance sheets or those that heavily cut costs during the pandemic, such as Qantas (ASX:QAN) and Flight Centre (ASX:FLT).

Other stocks to consider would be Webjet (ASX:WEB), Helloworld (ASX:HLO), Rex (REX) and Corporate Travel management (ASX:CTD). Even those across the ditch such as Air New Zealand (ASX:AIZ) and Auckland Airport (ASX:AIA) could do well.

Reporting season outlook

Reporting season has kicked off in the US, with markets strongly supported by anticipated earnings growth. Earnings are expected to show a sharp 65% rise compared to a year ago, which validates the market's rally in 2021 so far.

Reporting season kicks off locally in August, which is also tipped to be broadly strong and followed by upgrades in the commodities and industrials sectors. We are also expecting to see the strongest earnings rebounds in ASX companies in over a decade.

Remember - as an investor, reporting season is the perfect opportunity to reassess your portfolio and identify your next investments. Look to broker research, media coverage and the results themselves - to really get 'under the hood' of the company and gauge how healthy it is.

Over the long-term, quality companies with growing earnings, cashflow or revenue and good management should shine brightly.

Above all, remember to keep your cool

The recent spikes and drops in markets are a timely reminder that the road to recovery will be bumpy! There are still significant sources of uncertainty and the ongoing lockdown in Sydney is a very recent example of this.

Volatility and market fluctuations are a very normal part of investing and not to be feared. It's just about keeping perspective.

The economy is forecast to recover, alongside equities which are predicted to rise in value over the longer term- but there will of course be dips along the way.

As a savvy investor, consider taking advantage of the market dips to buy quality stocks at reduced prices. And really think twice before selling. Time and again we see market falls followed by a rebound, with many investors making the mistake of panicking and locking in losses.

Above all, remember to keep your cool and carry on. The investors who can stomach the ride tend to come out on top.

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Jessica Amir is a market analyst and media presenter for Bell Direct, Desktop Broker and Bell Potter Online. She has more than 14 years' experience in financial markets.