Buy Cruise and Airline Stocks Now? (June 2020 Update)

I have M1 Finance so I created a coronavirus travel stocks pie and added all the cruise and airline stocks to it. I then signed up for M1 plus to take advantage of their low 2% annual percentage rate and borrowed $5000; of which I invested $4000 of into the major cruise lines carnival, royal carribean, and norwegian. And the major airlines Delta, United, Southwest and American Airlines. I also bought boeing because I do like boeing and as the airline industry recovers we should see boeing stock come back as well. So why did I choose now to invest in the cruise and airline stocks? Well in one of my previous videos I uploaded back in early May. I said that cruise stocks were a good long term investment at the time. And I would have bought cruise and airline stocks then but honestly the stocks I had in my portfolio were doing really well. I haven’t been sitting around waiting to invest in cruise and airline stocks with all my money sitting in cash. I have stayed 100% invested throughout this pandemic in my favorite high growth stocks and a lot of those stocks have done really well with most of them fully rebounding from their coronavirus lows. So even though cruise and airline stocks have rallied massively from their coronavirus lows. I have still made money and maybe more money from the other stocks I’ve owned over the last couple of months than if I would have invested in travel stocks.

And while I don’t believe in timing the market. I do think that the recent momentum in cruise and airline stocks shows that these stocks might be ready to catch up to the broader market.

Let’s move onto my strategy with these travel stocks. I am a buy and hold investor, and I consistently transfer money to my investments each week regardless of the price. So for me, I try not to speculate and I like buying stocks of larger, more well established companies. And travel stocks such as the airline and cruise stocks fit the bill for stocks I can comfortably invest in. However, I really didn’t want to sell any of the stocks I already had because I have quite a bit of capital gains in those stocks and I didn’t want to realize those gains because then I would be required to pay taxes on them. So that is why I decided to open a margin account and borrow the money to buy these stocks. And my plan is to hold onto these stocks for a year. That’s my target because at that point the short term gains will turn into long term gains. But more importantly, I am strictly looking at taking advantage of the rebound in these stocks and once that happens, there are other stocks I would rather hold long term. So, I will continue to put my own money into non travel stocks and will use the borrowed money to see if I can achieve some nice short term gains with the cruise and airline stocks.

For me, I do not feel like I am speculating because I do believe cruise and airline stocks are undervalued at the moment and that they do have intrinsic value that makes them more than just a speculative stock. But it has always been for me, about putting my money where I can get the highest returns. And like i said, with all the other stocks I own hitting new 52 week highs and travel stocks still lagging. I felt like it was time to make a calculated decision to buy in hopes that these stocks can catch up. And the quicker the better.

So let’s talk about what could happen if I am wrong. Because as investors it is important to factor in worse case scenarios and understand what could happen if things go terribly wrong. Let’s say that coronavirus cases spike in the fall and travel stocks drop. Well, I am taking a year long investment time horizon with these stocks which means I will most likely just hang on for the ride and wait for them to recover.

“What if some of the companies go bankrupt?” That is where diversification comes in, I am buying all the major cruise and airline stocks so if one does go bankrupt then I don’t lose all my money. But I don’t think it’s likely that all of them will go bankrupt and in my opinion 1 or 2 is the max that would go bankrupt if things did suddenly get worse.

Another doomsday scenario would be if they never recovered and traded flat for an entire year. Well in that case, I would sell to pay back the margin loan I took out and I would pay the interest on the loan which right now is only costing me $100 a year. Of course you also have the possibility of a maintenance call on your account which is where the value of your investments drops so much that the broker sells some of your stocks to cover the loan. But that is unlikely since I am only borrowing 35% of my available credit right now and my portfolio would have to drop by 85% to incur a maintenance call. Also keep in mind that any new money I put into the account will be my own money and it will go to the other non travel related stocks I own. Therefore if I am wrong about travel stocks rebounding, hopefully the other stocks I own will appreciate during that time.

Видео Buy Cruise and Airline Stocks Now? (June 2020 Update) канала Justin Scott