Delta's Low Multiple Entices Leon Cooperman

| About: Delta Air (DAL)

Summary

Recently, Leon Cooperman increased his exposure to Delta and this is usually a whale to get behind.

I am long Delta and will continue to be long the name for the foreseeable future.

If oil continues to stabilize or decline, the airlines should be increasing their bottom lines even more.

As I sit here in my seat on a Delta (NYSE:DAL) plane headed for Detroit I think to myself, "Oh Delta! You have disappointed me and all other long-term investors throughout this calendar year and over the past year as well!" It has really been a pain to investors as its stock price has dropped from $44 to $36, which is good for a drop of 18.2% in the past year.

In the three months I've owned the stock, now it is down 16% and I am down 11.7%. I am only down less compared to the absolute loss because I have been picking my spots when to purchase shares in the name. Despite its gloomy returns over the past year, I remain optimistic on the name because I still see value and I even levered up by buying a September $40 call.

I will admit the seats on Delta flights have gotten a bit more expensive but the experience is well worth the money spent. I have a TV in front of me, an electrical outlet to charge my laptop, and Wi-Fi. Not too many carriers offer all these amenities and it makes traveling so much more pleasurable.

The company recently announced additional flights out of Boston's Logan International and it was initially thought of as a strategic move for capacity expansion but may have actually been a subtle attack on JetBlue (NASDAQ:JBLU) because of its capacity expansion attempts on Delta's home turf of Atlanta.

There's always subtle gamesmanship taking place in these types of strategic moves, but in the end, it comes down to dollars and cents. JetBlue has not flown to Atlanta for nearly thirteen years and but with some hefty margins attached to flights from Atlanta to the New York area, it makes Atlanta a lucrative airfield that Delta has to defend.

I am long Delta and will continue to be long the name for the foreseeable future. I own the stock and own a call with September expiration as can be seen below. The airline is really cheap right now and offers a dividend yield.

I am also long Southwest (NYSE:LUV) as a hedge to Delta's global exposure because I continue to believe that US travel is robust. Recently, Leon Cooperman increased his exposure to Delta and this is usually a whale to get behind. If oil continues to stabilize or decline, the airlines should be increasing their bottom lines even more.

I actually initiated my position in Delta in late May and have been pretty upset with the purchase thus far. But I never look to initiate a full position in a name immediately and will continue to purchase shares as long as it is below $40 because that is where my cost average is. I never like to dive full bore into a name, I always buy in increments.

I swapped out of Biogen (NASDAQ:BIIB) for Delta during the portfolio change-out in late May because I had no faith in Biogen anymore and felt that it might lag the rest of the market. Boy was I wrong! For now, here is a chart to compare how Biogen and Delta have done against each other and the S&P 500 since I swapped the names.

Click to enlarge

It doesn't look like the trade has worked out from the chart above and that is because Delta has been dropping due to feared capacity expansion news and fierce competition as I discussed earlier with JetBlue. I have moved Delta from the value picks of my portfolio to the speculation picks.

When it is all said and done, it matters what the stock has done in an investor's portfolio at the end of the day. For me, Delta is one of my larger positions and has been beaten down as I'm down 11.7% on the name, while the position occupies roughly 11.6% of my portfolio. I continue to believe in the name because it has been beaten down and offers great value.

I own the stock for the speculation portion of my portfolio, and I will continue to hold onto the stock for now. I am up 8.7% since the inception of my portfolio, while the S&P 500 is up 4.3%. Below is a quick glance of my portfolio and how each position is performing. Thanks for reading and I look forward to your comments.

Company

Ticker

% Change incl. DIV

Portfolio

The Priceline Group Inc.

(NASDAQ:PCLN)

24.24%

7.02%

Electronic Arts Inc.

(NASDAQ:EA)

8.44%

4.61%

AbbVie Inc.

(NYSE:ABBV)

4.50%

3.94%

Target Corp.

(NYSE:TGT)

2.37%

8.21%

Southwest Airlines Co.

-0.83%

11.13%

T. Row Price Group, Inc.

(NASDAQ:TROW)

-0.96%

9.72%

KLA-Tencor Corporation

(NASDAQ:KLAC)

-3.71%

5.83%

Gilead Sciences Inc.

(NASDAQ:GILD)

-8.91%

15.82%

Delta Air Lines, Inc.

-11.67%

11.63%

Signet Jewelers Limited

(NYSE:SIG)

-14.44%

9.40%

GILD SEP 16 2016 85.00 CALL (Open)

-61.72%

0.12%

DAL SEP 16 2016 40.00 CALL (Open)

-74.83%

0.06%

Cash

$

12.50%

Click to enlarge

Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am/we are long DAL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.