One theme I’ve been beating pretty consistently since late last year is that I don’t understand the valuation of “pandemic recovery” plays. These are things like cruise ships, airlines, restaurants, and a variety of other things that have been shut down by the pandemic. Almost all of these are trading at valuations significantly in excess of their pre-Covid valuation despite currently burning significant amounts of cash as they wait for the reopening. I can understand some of the logic: the market thinks there will be a period of super-normal profits as the country reopens (the “roaring 20s”) and the recovery plays see a swell of demand alongside a barren competitive landscape given smaller competitors have gone bankrupt.
Premium Post: a Timely Recovery Play
Premium Post: a Timely Recovery Play
Premium Post: a Timely Recovery Play
One theme I’ve been beating pretty consistently since late last year is that I don’t understand the valuation of “pandemic recovery” plays. These are things like cruise ships, airlines, restaurants, and a variety of other things that have been shut down by the pandemic. Almost all of these are trading at valuations significantly in excess of their pre-Covid valuation despite currently burning significant amounts of cash as they wait for the reopening. I can understand some of the logic: the market thinks there will be a period of super-normal profits as the country reopens (the “roaring 20s”) and the recovery plays see a swell of demand alongside a barren competitive landscape given smaller competitors have gone bankrupt.