Airline Industry

  • 24 Jan
    Is LUV the best airline stock to own right now?

    Is LUV the best airline stock to own right now?

    At the beginning of this week, I used news about widespread flight cancellations as a launching pad to start looking at the airline industry. Airline stocks haven’t seen quite as much volatility as I thought they might from the news, which I’ll go ahead and take as an overestimation on my part about how much credence the market would really give that news. It’s also fair to say that in a highly cyclical industry, airline companies are well aware of the risks that come from inclement weather, and while not all contingencies can be anticipated, they do try to factor that risk into their operational models. More →

  • 22 Jan
    AAL might be a big value – but it looks more like a big value trap

    AAL might be a big value – but it looks more like a big value trap

    Yesterday, I wrote about news over the weekend that winter storms had resulted in more than 1,100 cancelled flights out of Chicago. Another report indicated that from the Midwest to New England, total cancelled flights were more than 2,000 over the course of the weekend. The market was closed yesterday, so the first opportunity the market is going to have to react to this news is today. Don’t be surprised, however if airline stocks in particular are among the most volatile in the market through the entire week. More →

  • 21 Jan
    Do winter storms make airlines like DAL a risky bet?

    Do winter storms make airlines like DAL a risky bet?

    This last weekend, one of the headlines that grabbed my attention was about winter storms in the Midwest. Of course, at this time of year it doesn’t come as any kind of big surprise to hear or read about snow, cold or big storms in that part of the country; but any investor with an interest in paying attention to things that can impact the stock market should have sat up and taken notice by the accompanying report that more than 1,100 flights were cancelled out of Chicago by Saturday afternoon. More →

  • 02 Jan
    ALK is a bargain-priced airline stock you shouldn’t ignore

    ALK is a bargain-priced airline stock you shouldn’t ignore

    One of the sectors that has led the entire stock market lower, and nearly to bear market levels is the transportation sector. Transportation is a sector that is normally expected to perform well when the economy is healthy, but as it has shown since the beginning of the last quarter of 2018, it can also lead the broad market as a bearish indicator when economic uncertainty and market fear increases. As measured by the S&P Transportation SPDR (XTN), the sector has declined by more than 18.5% since hitting its last major peak in late August of last year. That decline has really accelerated in the last month, as the sector has dropped almost 15% since the beginning of December. That has pushed a lot of stocks in this sector to levels not seen in the last two years. More →

  • 10 Dec
    Transports are down 16% since September – but that doesn’t make SKYW a good bargain

    Transports are down 16% since September – but that doesn’t make SKYW a good bargain

    The market hasn’t been kind to the Transportation sector since the end of the third quarter of the year. As measured by the S&P Transportation SPDR ETF (XTN), the sector declined from its 52-week highs at the beginning of September nearly 20% by Halloween before staging a temporary rally through November. Since the beginning of the month, however the sector has dropped back near to its yearly lows. More →

  • 30 Aug
    Air Travel Is Booming – Here’s The Best Way To Invest In The Trend (And No… It’s Not Airlines)

    Air Travel Is Booming – Here’s The Best Way To Invest In The Trend (And No… It’s Not Airlines)

    • It’s interesting how global economic activity is shifting more and more toward the east.
    • Air traffic is expected to continue to grow at more than 6% per year. However, this doesn’t mean that any related investment will do well.
    • Good investments will be those with limited or no competition. Think airports.

    Introduction

    When investing, you want to be exposed to growing trends not declining ones. Not that investing success can’t be found in declining industries, but focusing on growth sectors simply increases your chances for a positive return and lowers the possibility of a negative return. Thus, increasing your expected return and lowering your risk.

    One such almost certain long-term trend is the growth of the global airline industry. More →

  • 16 Jan
    Gruesome Industries For Trading, Not Investing

    Gruesome Industries For Trading, Not Investing

    • Even if the industry has wonderful growth numbers, profitability might remain out of reach.
    • We’ll define and describe the industries long term investors should avoid.

    Introduction

    Most of you are familiar with Warren Buffet’s comment on the airline industry in his 2007 letter to shareholders:

    “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”

    Now, most connect the above statement only to the airline industry. However, in a deflationary environment where our youngsters expect lots of things for free—think WhatsApp—and extremely low interest rates, there will be more industries where shareholder wealth creation will be difficult to achieve.

    In today’s article, we’ll define and analyze some of these industries. More →

  • 05 Jul
    You Fly the Friendly Skies, But Should You Invest in Airlines?

    You Fly the Friendly Skies, But Should You Invest in Airlines?

    • Airline valuations are incredibly low but the risks are also high, especially if a recession arrives.
    • Demand fell by 20% and stocks fell by more than 90% in 2009.
    • The global long term outlook is very positive with demand expected to double in the next 15 years.

    Introduction 

    In his 2007 letter to shareholders Warren Buffett stated that airlines are the worst sort of business because they require significant capital to engender growth and earn little or no money. He continues that creating a durable advantage has been elusive since the days of the Wright Brothers and even concludes that “if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.” More →