Avoiding the airlines, I was curious to see whether there were other investment options to take advantage of the return of leisure travel. What about the airports and train stations themselves?

For anyone who has plucked up the courage in recent months to book an air ticket, don a mask and head off to warmer climes, it will have come as a shock to see what has happened to our busy airports.

The days of crowded bars, restaurants and lounges are a distant memory. It is more likely that travellers passing through the UK’s regional airports in recent months will have been greeted by vacant spaces, apologetic notices on the doors of closed food outlets, and small groups of passengers discreetly attempting to avoid each other.

My own recent experience at Gatwick was, however, a little more encouraging. Whilst the cavernous South Terminal remains as a mothballed shell, the buzz at the North Terminal was definitely more upbeat. This gave me some encouragement about the sector’s ability to recover its mojo by the time summer rolls around.

For me, an alternative option for exposure to the sector can be found through SSP Group (LSE: SSP), one of the leading worldwide operators of travel food concessions, to be found in multiple airports and railway stations across five continents.

In 2019 SSP was flying high, with its share price in excess of 600p and profits of over £200m. A year later, however, the company’s activities had been decimated by the unforeseen impact of Covid’s first wave.

Management have nevertheless shown resilience and utilised government support, in the form of furlough payments and emergency loans, to tide them through the worst of the pandemic. Negotiations with landlords and a successful rights issue in April 2021 allowed them to reduce leverage and re-position the business for the post-pandemic period.

A recent trading update — on 4^th February — informed us that trading in the company’s main markets (UK, Europe and North America) had regained ground, to between 63% and 79% of 2019 levels. Nearly three quarters of its total outlets are now open again, and there are plans for new expansion. Some of these new opportunities are likely to be taking advantage of the failure of other operators over the past two years.

The company is projecting a return to 2019 trading levels by 2024 and I like the fact that its portfolio of brands is focused on the leisure (rather than business) traveller.

Whilst I don’t believe that shares will return quickly to their 2018/2019 levels – and there remains a risk that new coronavirus variants might emerge and delay the world from travelling freely again – I am confident that SSP has strong upside potential over the next 12 months.

However, if Omicron means more lockdowns and a stock market crash or slump, I think these two share prices will be hit extremely hard. Even if Omicron makes little impact on the stock market, I’d still avoid them as I think they are poor investments.

In the line of fire

SSP (LSE: SSPG) is an operator of food and beverage outlets in travel locations, principally airports and railway stations. This puts it directly in the line of fire when there are lockdowns and even advice to work from home when possible.

The SSP share price has more than halved since the start of 2020. At the same time, debt and the number of shares in issue have both rocketed. In my opinion, this fundamentally makes SSP a less attractive investment. It makes it harder for SSP’s management to drive increasing earnings per share, simply because there are more shares and debt costs more and takes away from earnings. 

As the company is loss-making, the shares are harder to value but if I ask myself: what is the growth potential here? I just don’t see any. Even if things turn out well with Omicron, there’s limited upside. If there are more lockdowns, the downside is potentially very high. I’ll be avoiding SSP shares.

Heading for disaster? 

Continuing on a train theme, Trainline (LSE: TRN) is another share I don’t think will do well if Omicrom rolls on. Earlier this year Trainline’s shares plummeted after the UK government unveiled a state-backed rival.

This change in competition comes on top of an underwhelming IPO in the summer of 2019, which in retrospect was fortuitous timing for the backers of Trainline that got out. The ticketing platform is loss-making. 

Then when you add in £169m of net debt there’s a lot to scare me away from investing in Trainline’s shares.

Trainline does operate beyond the UK, net debt has come down recently, and revenue growth is strong, but overall it doesn’t strike me as being a potentially profitable investment. That’s why I’ll avoid the shares.

Fundamentally, Trainline’s main business may cease to exist if the UK government competition is good enough to attract public transport users.

A brighter note to end on

Just quickly and to avoid making this article all about shares to avoid, I’d be tempted to invest in Melrose, especially if it becomes significantly cheaper. Already it has a price-to-earnings-growth ratio of 0.3, indicating it could be undervalued.

However, Omicron means a bigger margin of safety may be needed as the shares could fall in the short term, as a result of investors’ fear. So I’ll wait and see what happens before buying because new restrictions could hit the industrial group hard. 

Management, though, has a sterling track record of improving industrial companies and the company has been well managed through the pandemic. I think Melrose offers far more to investors whatever happens next than either SSP or Trainline ever can.

Rolls-Royce

I’ve talked a lot about Rolls-Royce and I stand by what I’ve said. It has great brand recognition, an excellent history of making good quality products. Royce has also been able to secure military contracts with both the UK and US governments, which will bring in revenue for several years to come. As a high-quality manufacturer, however, it has high operating costs and potential upsets to global supply chains knock investor confidence. This is why I believe the share price fell by nearly 12% on Friday. There aren’t many deals as good as this on the stock market and I am adding it to my portfolio as we speak.

International Consolidated Airlines Group SA (LSE: IAG)

IAG has fallen a further 12% since last week as news of the Omicron variant brought back fears of international flight shutdowns. The airline seems to be a favourite of investors who think that an end to the pandemic will bring its share price roaring back to pre-2020 highs.

The only problem with that assessment is the assumption that the pandemic will simply be announced to be over one day. The world will eventually get through this storm, but it could be years before the final cases are completely eliminated.

Between now and then, who knows how many new variants will be discovered? Even in ordinary times, IAG is a highly volatile asset. It has spent years bouncing between highs of nearly 500p and lows of just under 100p. It is currently trading near just shy of 100p, but since I’m not willing to become a trader, this is one I’m steering clear away from.

SSP Group (LSE: SSPG)

SSP is a multinational food contract service. It operates around 2,800 branded retail units in airports, train and bus stations around the world. Naturally it was hit hard by the initial Covid lockdowns. The share price has taken a further loss of around 15% over the last few days, and currently trades for 214p. However, I think that SSP will fare far better than IAG. In the years before Covid, SSP increased its revenue and its profit margins. It also paid down debt and saw steady, sustainable growth in its share price.

There is a lot of pent-up demand for both air travel and food services. But reopening small cafes domestically have far fewer issues than operating international flights. Small retail units also have much lower operating costs than airlines. Once the world gets back on track, I believe SSP is in a good position to regain its pre pandemic share price of 550p.

The future

No one can be sure what will happen because of the Omicron variant. This could be a flash crash or the start of a much longer decline. But Warren Buffett famously said “Be fearful when others are greedy and greedy when others are fearful.” I see a lot of fear right now.

Here are three companies in three different sectors I would buy with £3k today. 

Recovery shares to buy

The first company is the construction group Balfour Beatty (LSE: BBY). This might not be suitable for all investors. Indeed, construction businesses can be risky to own because profit margins in the industry are razor-thin. As such, these corporations can struggle to pass on rising costs to customers, which can impede profit growth. 

Still, I think this company is one of the best shares to buy for its exposure to the UK construction sector. The industry is already reporting strong growth. Moreover, the government’s infrastructure spending plans should only drive growth higher in the medium term. 

As one of the largest construction businesses in the country, Balfour should be able to capitalise on this trend over the next few years. Its size should also help it navigate any headwinds at the same time. That’s why I would buy the stock for my recovery portfolio today. 

Property sector

In the property sector, I would acquire LSL Property (LSE: LSL). The property industry is one of the largest sectors of the UK economy, and LSL is one of the few genuinely diversified property businesses listed in London.

The company owns estate agent brands, provides financial services, and works as a surveyor for some of the largest mortgage providers in the country. The group is a one-stop-shop for property in the UK.

That’s why I think this is one of the best shares to buy today and would require it for my recovery portfolio. I feel that no matter what happens over the next few years, LSL’s diversified portfolio will help the business navigate any environment. 

That does not mean the enterprise is without its risks and challenges. For example, the property market could come under pressure if interest rates suddenly increase. That would curb demand for the group’s services, weighing on profitability and the stock price. 

Travel and tourism

The last company I would acquire for my recovery portfolio is SSP Group (LSE: SSPG). I think it’s fair to say this enterprise, which owns a portfolio of food and beverage outlets in travel locations worldwide, has had its business model decimated by the pandemic. Revenues for the six months ended 31 March 2021 declined 79% on a like-for-like basis. 

Considering the challenges facing the enterprise, it’s certainly not for the faint-hearted. Not only have SSP’s revenues collapsed over the past year, but it has also built up an enormous debt mountain. At the end of March, net debt, including lease liabilities, was £2bn. In comparison, revenue for the six month period was £257m. 

Management doesn’t expect revenues to return to pre-Covid-19 levels until 2024. That implies SSP is set for several years of uncertainty. So the risks of investing here are clear. Nevertheless, I would buy the stock for my portfolio because I believe it has excellent recovery potential. I think the company can outperform expectations as the global economy reopens, which could make it one of the best shares to buy today. 

Desperately raising more cash

Rolls-Royce (LSE: RR) has had a year to forget. It wasn’t firing on all cylinders even before the pandemic. There were problems with its Trent 1000 engines which were piling up costs for the engineer. Now with planes barely flying, revenues have plummeted – just like the share price.

This has forced Rolls-Royce to ask investors for more money. Just recently, it has had to raise £5bn. This money will dilute shareholders who’ve already lost much of the value of their shareholdings.

My take is that investing in Rolls-Royce at the moment is a gamble. The shares are likely to fall further before any recovery (if one happens) takes hold. I think it may be too risky, even for contrarian investors.

Cheap, but not a great recovery share for me

SSP Group (LSE: SSPG) has also been hammered by Covid-19. The group, which owns food kiosks in transport hubs, has been hit by low use of public transport and therefore low footfall past its premises.

Only last month the firm was warning of “considerable” job losses. Its second-half sales fell by 86%, showing just how reliant it is on travel for sales. The group has taken measures to reduce the cash it uses up, which is sensible. Even so, cash burn is still going to be around £250m-£270m every six months.

Unfortunately, in its last annual report, it only had £233.3m of cash on the balance sheet. Debts well exceeded this, including its short term liabilities – those needing to be paid by this September. So the balance sheet doesn’t strike me as being very robust.

Any road to a recovery feels like it will be a long one. The results, I think, make that clear.

This company feels like it will face an ongoing hit from the lack of commuters. Working from home may have permanently damaged the business model. As such, although the shares appear cheap, I’d avoid them.

Another potential recovery share I’ll avoid

Intercontinental Consolidated Airlines (LSE: IAG) is the last share I’ll look at. As the owner of British Airways and other airlines, its shares have fallen because of Covid-19.

This meant it has had to launch a steeply discounted €2.75bn rights issue, something other struggling companies are having to do as well.

Bookings remain well down as travellers opt to stay at home this year or go on a staycation. Bookings across the group have only recovered to about 30% of pre-pandemic levels. The recovery looks some way off with predictions that it will take years for the industry to get back to capacity.

I think it will be a long time before any of these three ‘recovery’ shares can deliver for investors. They may appear cheap now but I’d avoid them.  

When the markets crashed, travel stocks and those that rely on the travel industry got walloped, so they are cheap. A coronavirus vaccine should help the travel and tourism industry get back to normal sooner than expected, which could mean swift travel stock price rises. Here are two stocks that could make you rich from a successful coronavirus vaccine.

SSP Group

Owning hundreds of shops selling high margin sandwiches and sausage rolls sounds good. Unfortunately for SSP Group (LSE: SSPG) its outlets, like Upper Crust and Caffé Ritazza, are often found in train stations and airports, and hungry travellers have been scarce.

The impact of the coronavirus on SSP and its employees has been severe. However, the medium-term prospects for the company look a little brighter. Passenger numbers are picking up in the US, Europe, and the UK – where SSP operates – and they need food for their journeys.

The market crash wiped 60% off the price of SSP shares. Right now, they are trading around 260p, which is cheap by historical standards. Should a coronavirus vaccine be released, SSP’s performance should recover much faster than is currently expected. I would expect SSP’s share price to take off under such a scenario, which could make investors rich.

But what if a vaccine does not materialise? Well, SSP has enough liquidity, and access to more if needed, to see it through its most pessimistic scenario. What this means is that the company is likely to be around in the future vaccine or no vaccine. 

Meggitt PLC

The coronavirus crisis has grounded fleets of planes across the world. Meggitt (LSE: MGGT) makes components and sub-systems for airliners. Fewer plane orders by airlines have put a dent in Meggitt’s sales of bits and pieces for new aircraft. Less scheduled and unscheduled maintenance of aircraft has also cost Meggitt sales.

Air travel is now picking up but remains well below normal. The current thinking is that it will take years for passenger numbers to get back to 2019 levels. A coronavirus vaccine would turn these assumptions on their head. Meggitt’s share price should benefit substantially from aircraft sales and activity hitting 2019 levels much sooner than currently expected.

The market crash wiped almost 60% off the value of shares in Meggitt. At a current price of 310p or so, shares are trading at about 12 times consensus earnings for 2021. Meggitt’s stock price-to-earnings multiple is usually around 14. What this suggests is that Meggitt’s stock is cheap at the moment. A coronavirus vaccine would lift 2021 consensus earnings, which would justify a higher price based on the P/E multiple. Meggitt stock could make an investor rich if a coronavirus vaccine is discovered.

Unlike Bitcoin, good quality stocks generate earnings that support their valuation. I think stocks could provide some of the best opportunities for investors to profit from the market crash. Today I want to tell you about three FTSE 250 stocks I believe could double from current levels.

Read all about it

Newsagent WH Smith (LSE: SMWH) was founded in 1792, making this FTSE 250 firm one of the UK’s oldest listed businesses. However, this impressive longevity hasn’t stopped the WH Smith share price falling by 50% from the all-time highs seen in January.

Investors’ are worried that sales at the group’s travel division — including airports — will collapse.

WH Smith confirmed these fears with a warning on Thursday that the company is seeing a significant drop in passenger numbers in the US and Europe. Together, these regions account for 85% of the group’s travel sales. This is expected to lead to a 20%-25% fall in pre-tax profit, compared to last year.

I suspect the eventual impact will be worse than this. But I’ve long admired WH Smith as a high quality business that generates strong shareholder returns. The shares look historically cheap to me at current levels. I think they could double over the next few years.

Is this 14% yield for real?

FTSE 250 oil and gas sector service provider Petrofac (LSE: PFC) faces two very serious problems. The first is this week’s oil price crash. This could lead to a downturn in new orders and put further pressure on profit margins.

The second problem is that the company is under investigation by the Serious Fraud Office. This has been ongoing since 2017 and has not yet resulted in the company or any current employees being charged. But it’s not over yet.

CEO and 19% shareholder Ayman Asfari remains in charge of Petrofac and has made sure that the company is generating cash and is largely debt-free.

But Petrofac’s falling share price has left the stock trading on just four times forecast earnings, with a dividend yield of 14%.

There are obviously some serious risks here. But the shares are starting to look cheap to me compared to more heavily-indebted rivals. If the SFO investigation can be settled, I think Petrofac stock could be worth upwards of 300p.

This travel stock could bounce back

I’m avoiding airlines at the moment. But I do think there are some opportunities in the travel sector. One company I rate highly is catering firm SSP Group (LSE: SSPG), whose shares price has halved so far this year.

This FTSE 250 firm operates more than 2,800 food units in airports and railway stations around the world. SSP runs franchised outlets for brands such as Burger King, Starbucks and Jamie’s Deli, but the group also has its own brands — you may be familiar with Upper Crust and Ritazza, for example.

Profits rose by 12% last year and the company generated a return on capital employed of 20%. I see these as impressive figures in difficult conditions.

SSP has been in business for 50 years. I’m pretty confident it will recover after the coronavirus outbreak. I’d be a buyer here, for a long-term portfolio.

The shares are down again today, despite what looks to be encouraging full-year results and a positive outlook. I don’t think it’s hard to spot why. 

Sales up 

Like-for-like sales rose 2.7% over the year to 29 December, with total sales up 56.4% to £1.07bn, thanks to the takeover of noodle chain Wagamama in 2018. 

Adjusted pre-tax profit also rose to £74.5m, compared to £53.2m in 2018. That said, the company reported a loss of £37.3m on a statutory basis, due to the underperformance of its leisure sites. 

Reflecting on today’s results, relatively new CEO Andy Hornby said the company’s prospects had been “transformed” by the Wagamama acquisition (despite a significant minority of its shareholders voting against the deal at the time). Ahead-of-schedule cost savings were also highlighted.

As a result of outperforming its markets, Restaurant Group now plans to focus on continuing to grow this and its Concessions and Pubs businesses at the expense of its Leisure portfolio. It’s aiming to reduce the number of sites of the latter, from 350 to between 260 and 275 by the end of next year. The company also plans to tackle its not-insignificant debt pile.

Unfortunately, all this will come at a cost to those already holding, with the £600m-cap business announcing today that it will “temporarily suspend” its dividend. Cue another drop in the share price (6%, as I type).

Restaurant Group traded on a forecast price-to-earnings multiple of 9 before markets opened this morning. With investors continuing to fret over the impact of the coronavirus on the global economy, I can’t see the shares heading significantly higher anytime soon, especially as prospective buyers will no longer be compensated for having the patience to wait for a sustained recovery in trading.

Factor in the hugely competitive environment in which it operates and the possibility that its entry into the US market might not go as smoothly as hoped and Restaurant Group remains firmly in my ‘avoid’ pile. 

One to watch

Despite today’s downbeat update on how the coronavirus was affecting trading, I’d be far more likely to grab a slice of travel concessions business SSP Group (LSE: SSPG).

Admittedly, now might not be the time to buy. While trading in the UK, Continental Europe and North America (which account for the vast majority of the company’s revenues) has been as expected, operations in other parts of the world have suffered. Passenger numbers at airports in China are roughly 90% lower year-on-year, with declines of 70% in Hong Kong, and between 25% and 30% in countries such as Singapore and Thailand. 

All this means SSP now expects sales in February will be 50% lower year-on-year in the Asia Pacific region. With operations in the Middle East and India also affected, this will likely reduce revenue by £10m-£12m and operating profit by roughly £4m-£5m.  

Clearly, SSP’s share price could face further pressure as the story develops. Nevertheless, I remain attracted to the company’s geographical spread and its ‘captive audience’ business model. As markets continue to head lower, this is one stock firmly on my watchlist as a potential long-term buy.  

The three shares I’ve selected for this piece are all members of the FTSE 250, which has risen by 30% over the last five years. That’s a respectable performance, but my stocks have all beaten this market since 2015.

A gaming winner?

As a general rule, I think online gambling stocks are a better bet than high street bookmakers. But one company with land-based operations that I rate highly is Rank Group (LSE: RNK), which owns Grosvenor Casinos and Mecca Bingo.

This week’s half-year results revealed that net gaming revenue from these venues rose by 10% to £312.3m during the second half of 2019. Although the company does have some online operations, these are still playing catch-up – revenue rose by 14% to £65.2m during the same period.

The good news for shareholders is that operating profit rose by 70% to £55.1m, on an underlying basis. This is down to an effect known as ‘operational leverage’. In short, if sales rise when costs are mostly fixed, then profits will rise much more quickly than sales.

Rank shares have risen by 77% since the end of August, but rising profits mean they still look reasonably priced to me, on 12 times 2020–21 forecast earnings. I remain a buyer.

An emerging market opportunity

Chief executive Mark Coombs owns 37% of emerging market asset manager Ashmore Group (LSE: ASHM). His leadership of the company he founded is one reason why I’m a big fan of this stock.

The other reason I like Ashmore is that Coombs’ track record suggest he and his team have a good grasp of the investment opportunities available in emerging market debt.

This specialist area isn’t the kind of investment where you can easily dabble with small amounts. You need a big stack of cash and a lot of specialist knowledge to be in with a chance of making money.

Ashmore ticks both of these boxes. Assets under management rose by 24% to $91.8bn last year, during which the company generated a return on equity of more than 20%.

The shares look fully priced on 18 times forecast earnings. But there’s a 3.3% dividend yield and I think this business has the potential to keep growing. I’d be happy to buy Ashmore for a long-term portfolio.

This double bagger could keep going

Catering firm SSP Group (LSE: SSPG) operates branded food outlets in travel locations, such as airports and railway stations. Some of these are operated on behalf of firms like Burger King, Jamie Oliver, and Starbucks. Others belong to SSP, such as Upper Crust and Ritazza.

SSP’s operations span 2,800 units in 35 countries. The company has been in business for 50 years but only floated on the London market in 2014. The shares have risen by 165% since then, but in my view the business still only looks slightly expensive.

As far as I can see, this is an excellent business operationally, providing good service in many locations. The main risk I can see is that a global recession could cause sales to slow in a number of major markets. So far there’s no sign of this.

The stock is pricey on 21 times forecast earnings, but I believe long-term growth prospects remain strong and I would remain a buyer.

The FTSE 250 retailer, which operates catering outlets in hundreds of airports and train stations the world over, certainly impressed last time it updated the market in November. It reported that revenues rose 9% in the 12 months to September 2019, to £2.8bn, with like-for-like sales rising by a solid 1.9% thanks to growing passenger numbers in the air and on land.

Strong sales helped underlying profit before tax leap 10.2% to £203.2m, and in further news SSP said that trading in the new financial year had been “in line with expectations.” I’m expecting an even more upbeat release when those aforementioned financials come out, too, one that could send its share price hurtling northwards.

Spreading out

Why am I so confident? Well SSP has turbocharged expansion to keep up with the steady rise in passenger numbers and to latch onto great opportunities in individual markets, too. Last year it opened a flurry of new units in major US airports like LaGuardia, Seattle and LAX; more outlets in air bases, train stations and motorway service areas across Europe; and expanded in airports in hot emerging regions like India.

And investors have more to look forward to in the near-term and beyond. Last year saw it enter another top growth market in Brazil, and the upcoming launches in Bahrain, Bermuda and Malaysia will see it eventually operate in almost 40 countries. Meanwhile, SSP won a large number of new contracts in some important markets across North America, mainland Europe, and in the UK as well.

I’m not just encouraged by SSP’s sunny revenues outlook as traveller numbers rise across the world and expansion plans continue, though. I also like the progress that the firm is making on improving margins and especially so in a time when cost inflation is becoming more problematic. The retail play saw underlying operating margin 30 basis points higher in financial 2019, to 7.9%.

A top dividend grower

With earnings having swelled by double-digit percentages during the past four fiscal years, SSP has consequently proved a hit with dividend chasers. Shareholder rewards have more than doubled in that time, culminating in the 11.6 per share reward of the financial 2019.

And City analysts expect another meaty rise in fiscal 2020, to 12.5p per share, supported by an expected 6% profits rise.

A 1.8% forward yield clearly isn’t much to get excited about, though the prospect of strong and sustained payout growth in the coming years still makes the retailer a top income buy today. SSP certainly has the sort of formidable cash generation to support additional, and excellent, growth – strength which saw it launch a £100m share buyback programme in the autumn.

On the negative side SSP is toppy on paper, dealing on a forward price-to-earnings (P/E) ratio of 21.8 times. But this wouldn’t discourage me from buying given its exiting growth plans and great record of recent annual profits expansion. I think it’s a top buy today.