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
Recommended for you
Some 42 per cent of CEOs say they are actively reinventing their business to stay relevant in the next decade, with consumer services the most common choice for asset and wealth managers.
Former Ophir Asset Management chief executive, George Chirakis, has joined private equity manager Scarcity Partners, while the asset manager has appointed a replacement from Macquarie.
Australian Unity has appointed a fund manager for its Healthcare Property Trust, joining from Centuria Healthcare, as it restructures the product with a series of senior appointments.
Financial advisers nervous about the liquidity of private markets funds for their retail clients are the target of fund managers launching semi-liquid products which offer greater flexibility and redemptions.
