As the western world started to re-consider their relationship with China and perceiving China as a military threat. I expect spending in the Defense sector will continue to increase. The plummeting in oil price could stir up some conflict in the Middle East region as well. Defense stocks would benefit from rising tension. In addition, this sector is one of the least affected sector by Coronavirus.
Lockheed Martin, a leading defense company, reported better than expected sales and profit. Also keeping the full year guidance, one of the few companies that keep the guidance.
I expected pure Defense companies earnings would continue to increase. I expect companies like Huntington Ingalls would benefit from lower steel price. (300-ish USD per ton early this year to 240-ish USD per ton now)
Company related to Boeing like Transdigm would underperform other players in the sector.
My current buy list is :
HII > BAE Systems = NOC > LHX >RTX = TDY > TDG = GD > BA
Accommodation :
STR has the US Q1 hotel industry report released yesterday, Occupancy for Q1 is 51.8%, down 16% , Average Daily Rate (ADR) dropped 4%, Revenue per available room (revPAR) down 19.3% to 64USD. (revPAR reflects the total revenue for hotels)
Occupancy rate for Q1 is definitely higher than I expected, which is thanks to high Jan and Feb occupancy rate.
For March, Occupancy rate is down to 39.4% from over 80% (which is still much higher than I expect) and ADR down 16%. revPAR down 52%.
week ended 18 Apr, when the entire US is in full lockdown mode, the Occupancy rate is still around 23%. (I expect somewhere around 0 as it is a full lockdown), ADR down 42% and revPAR down 80%.
Consequently, the worst case scenario is -80% on hotel revenue during full lockdown. I expect revPAR to increase to -50% on May as lockdown in certain places eased.
As mentioned in the weekly hotel report, the occupancy rate is floated by influx of medical workers staying in hotels instead of going home, which explains the "elevated" occupancy level.
I hope that together with the government support, majority of the hotel industry will survive.
Currently, I am buying cumulated preferred shares of hotel industry as common shares are still too risky for me.
My buy list:
Sotherly Hotels, braemar hotels, Summit Hotel Properties etc.
Strip malls sectors are absolutely crashed. Multiple big tenants go Cap.11 bankruptcy protection, customer flow dropped significantly. Hence, their stock price also crushed. I am buying some of the preferred stocks as the return would be quite handsome if they don't have to go Cap.11.
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