It’s not the 98% plunge in traffic through Australia’s once-bustling airport that will be keeping shareholders in Sydney Airport Holdings Pty Ltd (ASX: SYD) on edge.

It’s the battle between state premiers on boarder restrictions that will be a bigger sentiment driver for the airport as investors grapple with the fact that the company’s income isn’t as diversified as management claims it to be.

I’ll explain more of this later.

Clipped wings

The near-total freeze on domestic and international air travel due to the COVID-19 pandemic meant that only 92,000 passengers moved through Sydney Airport in April this year.

In contrast, 3.7 million flowed through its terminals during the same month in 2019.

Of the total numbers last month, 49,000 were domestic travellers, representing a 98% drop from April 2019.

Caught in the crossfire

The pressure is building on state premiers to allow Australian visitors from beyond their borders to return. This could happen in June although Queensland is the holdout.

Businesses and the federal government are pressuring Queensland Premier Annastacia Palaszczuk. She’s warning against restarting the tourism industry while our two most populous states of Victoria and New South Wales continue to report cases of community transmission, reported the Australian Financial Review.

The sunshine state indicated it may not welcome travellers from the southern states until at least September.

Meanwhile, NSW will allow its residents to holiday anywhere within the state from June 1, although that isn’t going to help Sydney airport or airlines like Qantas Airways Limited (ASX: QAN).

“New normal” for travel stocks

The airlines have flagged their own “new normal” for when services eventually resume. As a safety precaution, Qantas and Virgin Australia Holdings Limited will issue masks to passengers but won’t make wearing them compulsory.

The airlines will also stagger boarding and disembarkation (sounds like more bad news for cattle class passengers!), do more cleaning and have hand sanitisers in readily accessible places.

What they won’t do is leave empty seats for social distancing as Qantas’ boss Alan Joyce warned this will force ticket prices to surge nine-fold.

“L” not “V” shape recovery

It will be a long time before things go back to anything resembling pre-coronavirus, especially for Sydney Airport.

I am not even talking about the return of international travellers either as that will take many more months through a multi-stage comeback.

Eggs in different baskets but same trolley

Airport management boasted about its diverse income streams during its February results. Passenger traffic was flat but underlying earnings before interest tax depreciation and amortisation (EBITDA) jumped 4%.

This was due to rents it collects from retail, hotel and car hire companies. But even as domestic traveller return, the airport may have to contend with a second battle front.

Retailers are gearing up for a bitter fight with shopping centre landlords and structural change is in the air!

If retailers manage to secure significantly lower rents and change how mega malls charge for space, as I suspect, then I believe tenants at the airport will expect a similar treatment.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 climbs 1% in positive start to the week
• 2 high yield ASX dividend shares to buy for 2021
• 3 industries that may never recover from COVID-19
• Virgin narrows its shortlist down to 4 suitors

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why investing in these COVID-19 stricken ASX shares won’t be the same again for a very long time appeared first on Motley Fool Australia.

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If you’re looking for market-beating returns over the long term, then I think the healthcare sector is a great place to start.

This is because there are a number of quality options in the space which look well-placed for strong long term growth thanks to favourable sector tailwinds and their leading products.

Three ASX healthcare shares I would buy and hold are listed below:

CSL Limited (ASX: CSL)

CSL is a biotherapeutics company which I think would be a great long term investment. It is made up of two businesses – CSL Behring and Seqirus. CSL Behring is the global leader in plasma therapies and Seqirus is the second largest influenza vaccines company globally. I believe both businesses are well-positioned for growth over the next decade thanks to their leading products and burgeoning research and development pipelines. Combined, I expect CSL to deliver solid earnings growth for the foreseeable future.

Nanosonics Ltd (ASX: NAN)

Another healthcare share to consider with a long term view is Nanosonics. I’m a big for the infection control specialist due to its trophon EPR disinfection system for ultrasound probes and its upcoming product launches. While not a lot is known about these new products, management notes that they have similar market opportunities to the trophon EPR system. If they are anywhere near as successful, they could underpin strong earnings growth for a long time to come.

Ramsay Health Care Limited (ASX: RHC)

Times have been hard for Ramsay Health Care and things are unlikely to get easier in the immediate term. However, the market already understands this and has priced this into its shares. In light of this, I think now could be an opportune time to make a long term investment. After all, Ramsay’s long term outlook looks very positive due to increasing demand for its services globally because of ageing populations and increasing chronic disease burden. In addition to this, I suspect the company could bolster its growth with further acquisitions in the future. All in all, I expect its shares to be market beaters over the next decade or two.

More reading

• 3 ASX 200 blue chip shares I would buy today
• If you invested $10,000 in the Ramsay Health Care IPO, this is how much you’d have now
• How you can get very rich with ASX 200 shares
• How to invest $10,000 in ASX 200 shares today
• Should ASX investors just buy ETF index funds for better returns?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics Limited and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The crude oil price has risen by 30% since last Monday, 11 May. The easing of restrictions across large swathes of the world has raised hope of gradual increases in demand. Chinese oil demand, in particular, has risen to pre-pandemic levels. 

Moreover, the Saudi Arabia-Russia crude oil price feud has come to an end. Add to this the positive news related to a potential COVID-19 vaccine and oil and gas investors believe they can breathe freely again.

The damage has been done, however. On Monday, the US Energy Information Administration stated that US shale oil production would drop by record levels in June. Well economics and the continuing ravages of the coronavirus continue to batter the industry. While this is unfortunate for US shale oil producers, it will likely drive further short-term rises in the crude oil price on futures contracts.

Who stands to gain?

The Santos Ltd (ASX: STO) share price has already jumped by 11% this week since Monday. At present, Santos’ price-to-earnings ratio (P/E) is still at 10.26. I believe this is still a reasonable ratio given the company is very well managed. It has a strong LNG hedge and is targeting break-even cash costs of less than the current crude oil price. 

The Origin Energy Ltd (ASX: ORG) share price has had an upward burst of 5% since Monday. Origin recently announced a strategic move to structurally lower operating costs. It also has a $100 million additional cost out program in place and has defensive qualities as Australia’s largest gas retailer. At a P/E of 9.84, this is 6 points below its 10-year average.

As with Origin, the Woodside Petroleum Limited (ASX: WPL) share price has jumped up 6% since Monday. The largest of the 3, Woodside has a current P/E of 39.53 reflecting the company’s forward growth plans. This is lower than the company’s 10-year average P/E. However, it doesn’t matter so much with Woodside. The market clearly sees this company as a growth opportunity.

In truth, Australia owes a debt of gratitude to the Woodside management teams over the past 2 decades in particular. After inventing the LNG industry in Australia, this company is the driving reason why our country has become the world leader in LNG production in January of this year. 

Foolish takeaway

While oil price futures have started to rebound significantly, this is somewhat divorced from the reality of the physical oil market. The world still has a glut of oil. Moreover, the US is still far from pre-pandemic activity.

Since March, trying to forecast market trends is a fool’s errand. Nonetheless, positive sentiment within the market is likely to continue the crude oil price rise at least over the remainder of May, possibly into early June. Even so, of the 3 major energy ASX shares I favour Santos. It benefits directly from a higher oil price; far more than Woodside or Origin. 

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Should you invest $1,000 in Woodside Petroleum shares?
• 5 things to watch on the ASX 200 on Tuesday
• 3 ASX 200 shares to watch this week
• Why Aristocrat Leisure, Newcrest, Santos, & Zip Co shares are charging higher

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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