Reward capped for airline stocks
While airlines are likely to come back after the pandemic, the risk/reward of investing in them is unattractive, according to Lumenary’s Lawrence Lam.
In a webcast, Lam, who founded Lumenary Investment Management and the Global Founders Fund in 2017, said airline travel would return but that the factors required for that to happen meant he could not view them as an attractive option.
“Airlines will come back, however if you are factoring in risk then the risk/reward is not very attractive. In an upside scenario, they will return to a steady state but even in a steady state they won’t be growing any faster than pre-pandemic so your reward is capped,” he said.
“But it is all dependent on government co-ordination between nations and the vaccine roll-out.”
Airlines had been severely hit by the pandemic restrictions which closed international borders and capped flight volumes.
Since the start of the year, Qantas shares had fallen 27% while Sydney Airport had fallen 21%. In New Zealand, Auckland International Airport had seen its shares fall by 12% compared to returns of 1.9% by the ASX 200. However, they surged after the announcement of three successful COVID-19 vaccine trials in November.
Share price performance of airline stocks versus ASX 200 since the start of the year to 15 December 2020
AUTHOR
Laura Dew
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