Josh Brown says the consumer is strong. These two Best Stocks are ways to play it into the new year

Broad travel demand is accelerating into late 2025 with TSA screening a record 3.13 million passengers on Dec. 1, airline load factors consistently above 85%, hotel RevPAR rising across segments, and 2025 cruise bookings exceeding 2024 levels. Delta (added to the Best Stocks list Dec. 3) highlights premium, loyalty and partnership segments now at ~60% of revenue (up 3 p.p. year-over-year) and industry-leading reliability metrics (98.7% completion factor through Oct. 2024); Expedia reported net income up 40% YoY, U.S. room nights of 108 million (+11% YoY) and raised full-year guidance with ~2 points of expected margin expansion in Q4. Market action cited includes Carvana’s S&P 500 inclusion and strong technical breakouts for EXPE and DAL, while a spike in oil prices is flagged as the primary downside risk for airline equities.

Analysis

Market structure: Travel demand is broad-based — TSA peak 3.13m/day, airline load factors >85%, RevPAR up across tiers, and cruise 2025 bookings >2024 — which benefits premium network carriers (DAL), OTAs (EXPE), online marketplaces (CVNA momentum indirectly via consumer mobility) and hurts price-gouging regional incumbents (Vegas-facing WYNN) and lower-margin LUV/AA. Pricing power is concentrated: Delta’s Premium/Loyalty = ~60% revenues and >15pt higher margins, giving DAL capacity to expand yields without unit-demand loss.

Risk profile and horizons: Tail risks include a rapid WTI oil spike (~+$15 in 30 days) that can cut airline margins by double-digits, a geopolitical tourism shock (weeks) or a consumer credit squeeze (months). Immediate moves (days) are driven by technical breakouts (EXPE above $233, DAL $70 trigger), short-term (weeks–months) by holiday travel/Jan bookings, long-term (quarters) by corporate travel recovery and loyalty monetization. Monitor hidden dependencies: corporate travel mix, inbound FX shifts, and rev-share with hotels.

Trade implications: Favor overweight travel: tactical long DAL and EXPE sized 1–3% each, use explicit stops (DAL buy-stop $70, stop $59; EXPE buy on weakness >$233, stop $233). Consider pair: long DAL vs short UAL equal notional to express quality spread. Use options to define risk: DAL 3‑month $70/$85 call spread (buy) to cap premium; sell short-dated airline strangles only if implied vol > realized by 20%.

Contrarian checks: Consensus understates fuel/regulatory/demand skew — a durable travel recovery can coexist with concentrated losers (Vegas casinos, low-margin LCCs). CVNA’s S&P inclusion is real but expect 1–3 month mean-reversion after passive flows; if WTI >$90 or USD rallies >3% vs G10, reassess longs quickly.

Key Decisions for Investors

• Establish a 1–3% long position in DAL using a buy-stop at $70, set a hard stop at $59, reassess after next two quarterly updates (by end of Q1 2026); reason: premium revenue mix and superior ops give durable upside.
• Initiate a 2% long in EXPE on a breakout or pullback to the rising 50-day (~$233); place stop at $233, target 20–35% upside over 6–12 months driven by room-night growth and margin expansion.
• Open a DAL/UAL pair trade: go long DAL and short UAL equal dollar notional (1–2% portfolio), expecting quality and yield premium to outperform over 3–9 months; trim if WTI rises >$15 or airline sector IV jumps >30%.
• Buy a defined-risk DAL 3‑month $70/$85 call spread sized to 0.5–1% portfolio risk; alternatively, add a 1–2% momentum position in CVNA ahead of S&P rebalancing but plan to reduce by 25–50% within 30–90 days post-inclusion to capture reversal risk.