A change of season? Traders need to ensure they are positioned correctly for the next stage of the pandemic
November brings a ray of sunshine for the travel and tourism sector, but winter may be coming for remote working stocks
Grounded planes, closed borders, instructions to stay at home. It’s hard to imagine a more difficult operating environment for the travel and tourism sector than what we’ve experienced so far in 2020.
In August, at the height of the European holiday season, we highlighted how short sellers had already made over a $1bn from bets against a handful of major travel and tourism companies that comprise the STOXX Europe 600 Travel & Leisure Index. At the time, there was almost $3bn in outstanding short positions, suggesting more pain to come as the industry entered the traditionally quieter winter months and the prospect of a second wave of the virus.
However, a glimmer of good news came this week with Pfizer’s announcement that a viable Covid-19 vaccine may have been found. Global markets rallied and travel and tourism stocks were amongst the biggest winners.
Excellent news for those of us planning a summer holiday in 2021, but not so much for short sellers who lost $284 million on European travel and tourism positions on Monday. This was even more apparent in the US with 9 of the top 10 largest short position losses being travel & tourism companies or having a significant exposure to the sector:
Top 10 least profitable short positions – US market (Nov 9th 2020)
|The Walt Disney Company||-$236,193,825|
|The Boeing Company||-$242,611,684|
|Norwegian Cruise Line Holdings Ltd.||-$251,891,345|
|Wynn Resorts, Limited||-$253,785,998|
|American Airlines Group Inc.||-$274,828,946|
|Royal Caribbean Group||-$320,378,441|
|Booking Holdings Inc.||-$345,380,994|
|Expedia Group, Inc.||-$382,521,909|
|Carnival Corporation & Plc||-$520,645,038|
However, it’s fair to say the market’s hype wasn’t evenly distributed. Among the biggest winners of the pandemic so far have been the remote working stocks; an informal group of companies providing services as diverse as remote video conferencing, streaming, food delivery and exercise equipment. But following Monday’s announcement, it looks as though these companies may have had their moment in the sun, or at least are being cast into the shade.
According to our data, short positions on Zoom made almost $1bn on Monday whilst other companies in the top 10 included Netflix, Amazon and Peloton.
Top 10 most profitable short positions – US market (Nov 9th 2020)
|Zoom Video Communications, Inc.||$999,668,166|
|Teladoc Health, Inc.||$457,657,390|
|Alibaba Group Holding Limited||$448,493,764|
|Peloton Interactive, Inc.||$375,821,804|
Again, this story was replicated in the UK where Just Eat has become the most profitable short position in November so far, closely followed by grocery delivery company Ocado and supermarket chain Sainsbury’s.
Pfizer described Monday 9th November as a great day for science and humanity, and we all hope that they’re right. But Monday also signalled a fundamental shift in global market conditions – a change of season as optimism returned. As a result – and as our data highlights – the winners and losers that have so far defined 2020 are transitioning, in some cases at a rapid pace. Traders need to ensure they’re not caught out by a sudden change in the weather.
By Peter Hillerberg, co-founder of Ortex Analytics