5 stocks to profit from tourism's rising tide

All five of these companies have excellent prospects.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

At The Motley Fool, we are focused on long-term buy and hold investing, which necessitates identifying emerging and ongoing trends. This week we have been ably assisted by the release of a report by consultancy firm Deloitte. It has not only identified the six 'super sectors' that will grow faster than the rest of the global economy, but also stated that Australia has unique advantages in almost all of them. The sectors are tourism, gas, agriculture, health, international education and wealth management.

Essentially, the Deloitte report feeds into an investment strategy employed by some fund managers called the 'top down approach'. This starts with the big picture view of the economy (macroeconomic view) and then further analysis of sectors within that economy. 

As an illustration, I shall look at the tourism sector. The Deloitte report highlights Australia's natural attractions and our reputation as a safe and democratic country and concludes that the growing number of Asian tourists will continue.

The managing director of the October 16 float of Sealink Travel Group (ASX: SLK) has witnessed the substantial jump in tourist numbers into Australia from China. Between 500 and 700 Chinese tourists are travelling each day on the transport services to Kangaroo Island in South Australia, which accounts for 54% of total company revenues.

At the risk of overreaching on the nautical analogy, professional investors prefer companies with a natural moat. No, not the waters around Kangaroo Island, but the protection afforded by a company having first-mover advantage, sufficient scale and monopolistic features that ward off potential competition. Six competitors have tried and failed to dethrone Sealink's services to the island since 1989.

Following the theme of increasing Asian visitors, stocks worthy of equal consideration are Sydney Airport (ASX: SYD) for strong international passenger growth, Ardent Leisure (ASX: AAD) for rising attendance at its premium leisure assets, Flight Centre (ASX: FLT) for airfares within Australia and Crown (ASX: CWN) for casino patronage in Melbourne, Perth and ultimately Sydney.

Foolish takeaway

Having identified a growing market sector, all five of the abovementioned companies have excellent prospects. As opposed to a sector such as retail, the margin for error is much greater in tourism should any hiccups occur in company strategy or management, as most boats may still rise with the incoming tide.

Caution should be taken with a blanket approach to all tourism-related stocks. As highlighted by Mike King in this week's Take Stock newsletter (sign up for a free subscription and a bonus free report here), one should avoid investing in Qantas (ASX: QAN) due to a nonexistent moat and all manner of external unknowns.

Discover The Motley Fool's favorite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading:


Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »