When I make mistakes, I don’t mess around.
Last year, I made a pretty big one.
I recommended Delta Airlines (NYSE: DAL) in Alpha Investor in February 2020, just as COVID-19 started shutting down the world.
At the time, I saw a best-in-class airline that was being run by an outstanding CEO.
It had one of the highest operating margins in the industry. I figured that throwing in a great deal with American Express and the stock trading at an attractive price … how could I go wrong?
Back then, Asia was mostly seeing the biggest impacts from COVID-19. I didn’t think this was a big deal since only a very small percentage of Delta’s revenue came from Asia.
So, I thought I was smart by recommending a U.S.-based airline that should do well despite overseas travel shutting down.
Boy, was I wrong.
COVID soon kicked airline travel’s butt all around the world.
By May 2020, I’d realized business travel would no longer be the same. I had no clarity on what airlines would look like one to three years out.
So, I told readers to sell Delta. Back then, I said:
I have too many unanswerable questions about air travel, such as: Now that meetings are done via video conferencing, how much will business travel decline?
With the new restrictions and lockdowns that went into effect due to the pandemic, I was flying blind.
Instead of sticking with businesses that are predictable, I thought I had a good read on airlines. To say I missed the mark on that one by a country mile would be an understatement.
Since the pandemic started, air travel has completely changed…
A Changing Playing Field
Back when I managed money, it was pretty routine for me to travel across the country at the drop of a hat.
If a client said on a Wednesday afternoon that they had a 15-minute opening to meet me in San Francisco on Thursday … I was catching a flight Wednesday night.
So what if I had to spend $1,000 on a round-trip flight? If I could close the deal, I’d potentially be making millions. I never gave a second thought to the cost of a ticket.
I wasn’t alone. That’s how most business travel was prior to COVID. Now, everything’s completely different.
Today, a video call on Zoom easily replaces a $1,000 airline ticket … not to mention, the car service to and from the airport, hotels and meals that I’d need to shell out for.
This year, we saw business travel briefly come back to life. But that was all squashed last Friday, when the news about Omicron came out…
New Restrictions
With the new variant, we’re seeing it happen all over again. Here’s what The Wall Street Journal said on Tuesday:
Executives are paring back travel plans and events are getting canceled in the wake of the discovery of a new COVID-19 strain.
The uncertainty around Omicron is leading many countries to mandate new travel restrictions.
And that means many executives worldwide are changing their travel plans. Event cancellations or downscalings are already starting.
The London Bullion Market Association canceled its December 1 dinner. It was expecting about 300 to 400 people to attend. And a fifth of them were supposed to travel from overseas.
Airlines are already warning that they’re seeing lower bookings as a result of cancellations or postponements.
Johan Lundgren, CEO of one of Europe’s largest airlines, EasyJet has said:
There’s a period of uncertainty right now … the recovery through the winter will not be straightforward.
The Real Talk is that when there’s no clarity, there’s no way I can value a business. And if I can’t value a business, I have no business investing in it … and neither should you.
So, for now, I wouldn’t touch airlines or other travel-related companies with a 10-foot pole.
Instead, you want to buy businesses that have recurring revenue and a customer base that can’t live without them.
Alpha Investors know these kinds of companies well — like Broadridge Financial Solutions (NYSE: BR) and SS&C Technologies Inc. (Nasdaq: SSNC), which are seeing gains of 62% and 35% in about a year and a half, respectively.
Both companies are indispensable to their customers.
Right now, their stocks are trading above my recommended buy-up-to prices. So, I wouldn’t buy shares today. But they’ll continue to knock the lights out.
In the meantime, I’ll be looking for more opportunities just like them. Stay tuned!
Regards,
Founder, Alpha Investor
P.S. If you’re not yet an Alpha Investor member, you’ll miss out on my next profit opportunities. And there’s nothing I want more than to show you how to grow your portfolio. So, if you’re looking to achieve financial freedom, be sure to look into joining me and over 100,000 everyday readers right here.
Celebrating 1 Year of The Charles Mizrahi Show!
My mission has always been to help as many everyday investors as possible rekindle the American dream.
And a year ago, I released the very first episode of The Charles Mizrahi Show — to help you go to bed a little smarter than when you woke up.
Since then, I’ve sat down with over 50 guests who’ve shared their unique stories and expertise across business, leadership and more. (To see a special video from them, click here or the image below.)
And this year, the show has seen over 125,000 downloads. So, to those of you who have already listened, thank you! I’ve learned so much from my guests. I hope you have, too.
But for those of you who haven’t listened yet, you’ll want to check it out today. You won’t regret it.
