While other travel companies have been in freefall, Vail Resorts has held strong. Indeed, Vail is up nearly 30% since we added it to the portfolio in June — a remarkable rise, given the sector and overall market.
The bulk of Vail’s properties — made up of ski mountains — do their biggest business in the winter. And we haven’t lived through a coronavirus winter yet. Of course, we’re about to. And that’s what’s making so many stock watchers antsy.
There’s no doubt that parts of Vail Resorts' business will fall off in the pandemic. However, Vail has a lot going for it that other hospitality companies don’t.
- Skiing outdoors should be amongst the safest activities around this year. Just socially distance on the ski lifts, avoid spending time inside the lodges, and the risk of virus transmission will be very low.
- Skiing is great exercise — at a time when everyone is still looking for safe things to do outside the gym.
- Vail’s mountains tend to be convenient to, but well outside, cities. If you want to get away — and that’s just about everyone living under the threat of pandemic today — there aren’t many better places.
Plus, Vail Resorts still has plenty of cash on hand. It’s one of the largest companies in its sector, and in one of the best possible positions to survive. In fact, I’d consider it likely that Vail Resorts goes on a bargain-hunting spree if and when smaller ski operators start to struggle.
And Vail Resorts has proven time and again that management knows not just how to deal with downturns — but how to take advantage and grow in the discount days on the other side of a recession.
We’ll be keeping a close eye on Vail Resorts. It’s entirely possible that this year’s ski season will be a disappointment, and the stock may drop in the near-term. But Vail Resorts won’t be a disappointment in the long term.
I have no doubt the company will weather the current challenging conditions, and in the end emerge stronger for it. That's what Vail Resorts has been doing for decades now.
If something goes wrong, we’ll be ready to change our stance quickly. But, as things stand now, I foresee Vail being a strong member of our portfolio for years to come.