What happened

Travel-related stocks took a hit in early Wednesday trading. Federal Reserve Chairman Jerome Powell warned that "recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems," and those remarks took their toll on investor confidence.  

As of 1:45 p.m. EDT today, shares of flight and hotel reservations services Sabre (NASDAQ:SABR) were down 9.6%, while Expedia Group (NASDAQ:EXPE) took a smaller, 3.7% hit. Hotel operator Marriott International (NASDAQ:MAR), meanwhile, was down 3.7%. All three stocks were down even more earlier in the day.

3 red arrows going down and crashing through the floor

Image source: Getty Images.

So what

The news out of Marriott actually looked pretty good as recently as Monday, with the company reporting positive profits for Q1, commenting that its China business appears to be recovering a bit, and predicting that business will improve as COVID-19-related travel restrictions are relaxed.  

But Powell's comments today appear to be throwing cold water on that hope. According to the Fed chairman, additional financial stimulus may be needed to avoid long-term damage to the economy.

Now what

None of the above suggests that the economy in general (or the travel industry in particular) is poised to enjoy a V-shaped recovery that will see reservations on Sabre and Expedia boom, and guests flock to check into rooms at Marriott. Powell's reference to "liquidity" and "solvency" concerns, meanwhile, may be causing investors to focus on the balance sheets at Marriott ($11.7 billion in net debt), Sabre ($3 billion more debt than cash), and Expedia ($1.75 billion in net debt).

Of the three, Expedia appears to have the soundest balance sheet and, with $1.6 billion in trailing free cash flow, the soundest business as well. At a valuation of less than six times trailing free cash flow today, if you were thinking of taking advantage of today's sell-off and trying to grab one of these three falling knives, I'd recommend looking at Expedia first.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.