The travel and leisure industry, along with the airlines, has perhaps been the most savagely beaten group in the markets. With the COVID-19 outbreak wreaking havoc on the economy, the demand for travel has ground to a virtual halt.
The U.S. Global Jets ETF (JETS) was down as much as 65% from it all-time highs, reflecting the lack of industry demand and corresponding impact to the bottom line.
While many investors tend to run away from these falling knives, something unusual has happened here. Investors have actually flocked towards airline stocks.
Like we've seen with oil stocks earlier this year, investors have been trying to buy the dip en masse.
JETS had just $50 million in assets earlier this year, but is now sitting at nearly $1 billion.
So far, investors haven't been rewarded as the share price for JETS has bounced mostly sideways since they started piling in.
But that may be about to change.
JETS has recently moved back to the top of its short-term range and could be poised to finally break out. With states continuing to slowly reopen their economies, investors have been eyeing increased demand for travel and leisure activities.
Oil prices have already been reflecting the anticipated increase in demand, but airlines have yet to catch up.
If JETS can break through that top trend line at around $16, it could be a relatively quick trip to $20, a 25% gain from current levels.
The airline industry could take years to recover their pre-COVID levels, but with a P/E ratio of just 7, the valuation is compelling and difficult to ignore.
At this point, I'd rate JETS a buy with a short-term $20 price target, but this may be more suited as a longer-term buy and hold.
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