The reopening trade still has room to run, according to several market analysts.
Many investors are wondering whether the economic recovery’s windfall has been priced into the stock market, but to AdvisorShares founder and CEO Noah Hamman, that’s not yet a reality.
The reopening rally is “just beginning,” said Hamman, whose firm launched the AdvisorShares Hotel ETF (BEDZ) and the AdvisorShares Restaurant ETF (EATZ) last week.
“You’ve got American savers who have been holding back capital,” he told CNBC’s “ETF Edge” on Monday. “They’re going to be ready to spend it, and they’ll spend it aggressively, and they’ll do it in industries like restaurants or hotels that are really ready to soak up this demand.”
Vici Properties, Airbnb, Full House Resorts, Marriott International and Extended Stay America are the top five holdings in BEDZ. Jack in the Box, Del Taco, Brinker International, Yum Brands and Darden are EATZ’s largest positions.
Rising interest rates can also help the largely value-oriented reopening plays, said Steve Grasso, managing director of institutional sales at Stuart Frankel and a CNBC contributor.
“There’s still gas left in the tank for the reopening plays,” Grasso said in the same “ETF Edge” interview.
Hotel, restaurant and airline stocks in particular should get a boost from the blowout gross domestic product growth expected for 2021’s first quarter, he said.
“The other side to this is that you still have checks going out to individuals and we don’t know when those checks will stop,” Grasso said. “So, it’s hard to call an end to the reopening trade when the money keeps flowing.”
Mark Yusko, the founder, CEO and chief investment officer of Morgan Creek Capital Management, agreed that reopening plays have “a lot more to go” in terms of upside.
“What has to happen is true recovery. People have to get back to normal, and I think that has yet to happen,” he said in the same “ETF Edge” interview, adding that investors shouldn’t get overexcited about a pop in GDP.
“The real key here is the way AdvisorShares goes about it, is active management,” Yusko said. “We’re a big believer that we are on the cusp of a pretty significant transition over the next decade toward active management, away from passive, away from indexing, and that’s really going to favor these types of ETFs.”
However, investors should still keep track of the hotel and restaurant industries’ fundamentals, Tom Lydon, the CEO of ETF Trends, said in the same “ETF Edge” interview.
“Restaurants [are] having struggles hiring people right now because a lot of that lower-paid workforce actually was doing other things during the pandemic — going back to school, finding other careers — and also, food prices have gone through the roof,” he said. “So, the profitability of restaurants and actually hotels is something we need to keep an eye on, too.”
Nevertheless, “I’m optimistic on the space,” Lydon said.
BEDZ and EATZ both climbed around 1% in early Tuesday trading.
