When Gas Prices Drop, America Goes on Vacation
When gas prices fall, the U.S. consumer spends more in the stores. That much is clear.
But when they plummet-like they have during the last three months-consumers get even more excited, hitting the road, plane, or boat for vacations to the Caribbean and Las Vegas, history shows. This extra spending benefits stocks such as Marriott Vacations (VAC), Wynn Resorts (WYNN) and Priceline.com (PCLN) the most.
Gas prices are off more than 30 percent over the last three months. So CNBC.com ran a search using Kensho, a powerful quantitative analytics tool, in order to find what happens to individual stocks after such a drop. The Kensho study turned up 17 occasions during the last 10 years similar to now when gas prices fell 10 percent or more.
Marriott Vacations Worldwide, a timeshare operator offering jaunts to locations such as Phuket, Thailand, and Tuscany, Italy, was among the best performers in the query, posting a median return of 11 percent in the three months following such a slide in gas prices.
"As we transition to a stronger consumer confidence environment, that shift can go to new timeshare buyers," said Robert LaFleur, lodging analyst at JMP Securities. "It's really a question of how much money is left in your wallet. [You're] less anxious about spending on luxuries-things you don't need, but are nice to have."
JMP has a "buy" rating on Marriott Vacations Worldwide, as well as most major hotel operators.
Marriott Vacations spun off from Marriott International (MAR) in November 2011. Its bigger brother also performed well in the search, posting median gains of 9.9 percent after a gasoline price drop. What's more, the stock is almost a sure thing to trade higher in the three months following a slide in gas prices, trading higher on 71 percent of those occasions.
The casino and luxury hotel operator Wynn Resorts posted a median return of 14 percent over the same time frame, trading in the green 71 percent of the time during those three months.
Priceline.com posted a whopping median return of 17 percent following gasoline corrections, with positive trades 76 percent of the time, the search found.
RBOB gasoline futures closed down 3 percent at $1.82 on Tuesday, a 34 percent decline from September and far from the 2014's peak price of $3.13 a gallon in June. With oil trading at five-year lows, gasoline prices are expected to stay relatively low, analysts said.
Marriott Vacations shares are up 24 percent already over the last three months, but the Kensho study indicates the stock could have more room to run in the next three months when the higher demand from falling gas prices shows up in the company's earnings results.
Shares of Priceline.com and Wynn are both lower over the last three months so the drop in gas prices should be a tailwind for the stocks, if history is any guide.
CNBC's parent NBCUniversal is a minority investor in Kensho.