Airline Sector
Did a ton of DD on the sector and numerous companies in the sector today. So here are my thoughts.
LUV- I know LUV is a good company, but my understanding is they have significant exposure to BA, as well as the corona virus and a slowing economy. Don't need to add the BA risks as well to the risk of the sector right now so I'll pass on this one. Also has a higher PE than most in the sector.
AAL- Has one of the worst balance sheets in the sector it is cheap, but don't want a weaker balance sheet into a possible slowdown that we have to battle though. So I'll pass on this one.
DAL- has a nice divy of 3.41% even after today's rally. Probably the highest quality of the big airlines. On weakness probably not a bad buy for the long run, but do understand this isn't gonna be the best couple quarters for any stock in the sector, on a positive note probably Jet fuel prices have to be dropping for the entire sector so that is a plus to counter the less sales I guess. I wouldn't rush into any, but DAL is more attractive than LUV and AAL by a country mile in my opinion.
SAVE- Probably my favorite of the bunch, trades under book, is a very solid growth story in the space, and trades at a very reasonable multiple. On any weakness this would be my first choice for a trade, but I wouldn't rush it either.
MESA-I know nobody would think of this one. Obviously waaaaaaaaaaaaaaaaaaaaay smaller. It trades at a huge discount too book. Huge, the stock could double and it would still be under book. Do keep in mind before this corona virus 2020 was suppose to be a transition year (Mid point eps was like flat over 2019) and those numbers are likely to drop, if your like me and think 2021 will not be affected by corona virus and think the economies will pick back up after this quarter or two slowdown, possibly even negative growth in some places I do admit during Q1 and Q2 of 2020, than there 2021 forecast should be unchanged if that is the case a midpoint of $2.10, means the stock is trading less than 3 times earnings, this one probably has the most upside out of the group, but being as small as it is, there is always more risk with much smaller companies as well.
Truth Be told if you looking for a solid divy payer with decent stock price appreciation possibilities than your answer is DAL, if your looking for the possible best combo in the future of growth, valuation and decent balance sheet, than your answer is SAVE, if your looking for the stock with the most upside in the next 12-18 months it is clearly MESA, but it does offer higher risk that the other two. As for the sector as a whole, the sector will be under pressure, I do think for the long-term there will be bargains to be had, and I may enter small positions (Have no positions yet) on a couple of these if further weakness persists. But although they may bounce if your buying an airline at this point, you are buying it for 2021 numbers because 2020 will be hurt undoubtedly and numbers are probably too high in the sector in my opinion. All is just my opinion, and I could always be wrong though.
