Investing Themes for 2015

Here are a few less obvious plays for 2015: travel and entertainment.

There’s no good reason why Jan. 2 of a new year is any different than Dec. 31 of the previous year when it comes to investing. All you’ve done is flip the calendar page over. Yet, somehow the psychology of a new year gets people thinking about how the markets may change, and what direction certain sectors may go in.
An annual evaluation of your long-term diversified portfolio, complete with asset re-allocation, is a good idea. Since everyone else probably does it at year end, you may as well do the same.
So that brings us to the question of what themes are likely to be on the minds of investors as 2015 gets underway.
The obvious themes surround oil and how to play that, but I’ve already opined on that topic. I’m more interested in rooting out themes that aren’t immediately obvious to investors, but that warrant your attention.
The first place that won’t be obvious is the travel industry. Much of this has to do with underlying secular strength in the sector. As questionable as the recovery has been for the economy in general, travel stocks have done extremely well for many reasons.
On the airline side, the mergers finally shrunk the number of carriers to a point where fares have been jacked up significantly. The airlines also have taken to charging passengers for everything and anything to boost revenue. Many airline stocks are now doing very well, and the financials for most (but not all) are in good shape.
In the airline sector, I like Southwest Airlines (NYSE: LUV).
The other industry I like is hotels. All those people boarding planes are traveling somewhere, right? That usually means hotels. The hotel sector is in great shape, because demand for hotel construction still outstrips supply. That means more hotels need to come on line. In the meantime, those that already exist see heavier demand. That means room rates can go up. Occupancy rates have also been increasing.
I like Ashford Hospitality Trust (NYSE: AHT) and Ashford Prime (NYSE: AHP), both of which have great financials and pay solid dividends for hotel REITs.
Another theme that’s similar are good trends in media and entertainment. The dirty little secret of any entertainment company is that the only thing that really matters is content. If the content is good, the company will do well. Content has been improving, particularly in television. Films are still struggling in that category, so the studios have been putting all their eggs into a limited number of genres. Those studios that own great franchises are in the best shape.
More importantly, those companies with diversification in their entertainment empires have a lot more room to grow and can spread risk around by having so many divisions. My long-term selection for entertainment is Walt Disney Company (NYSE:DIS), because it has assets across multiple formats and platforms, and also owns the massive moneymakers of Marvel Studios, LucasFilm, and Pixar.
On the TV side, I think AMC Networks (NASDAQ: AMCX) continues to produce strong content under the leadership of the visionary Charlie Collier. As long as he runs the content there, you’re in good hands.

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