The onset of the COVID-19 pandemic in early 2020 brought a sudden halt to social gatherings, crowd events, and even personal contacts. Experiential business models were hardest hit by forced closures and lockdowns; cruise ships were forbidden to sail, restaurants and theme parks were closed, and air travel and hotel occupancy dwindled, all in an attempt to minimize personal interactions. The stocks of leisure services companies took a beating in March 2020, with Chart 1 documenting the virus’ impact on 34 large and midcap stocks representing this theme.
A strong argument can be made that experiential consumer services was the economic sector hardest hit by the pandemic lockdown. Cruise ships were forbidden to sail, restaurants and theme parks were closed, and air travel and hotel occupancy dwindled—all in an attempt to minimize personal/public interaction. The stocks of experiential companies took a beating in March 2020.
How does one value a stock market in which 12-month forward EPS estimates show their widest dispersion in history? A good start might be with methods we use when forward estimates show practically no dispersion (like three months ago). In either case, we place little weight on such estimates; each revision usually has only marginal impact on our 5-Year Normalized EPS.