Alan Brochstein

Allegiant Travel: Not Your Typical Airline Stock

Good luck... This one has been an enigma. I know that Trader Mark, who frequents S.A. got frustrated with this one due to the way it was acting over the summer. You might read the Barron's cover story from the late summer too, as it laid out the bear case (not too convincingly in my opinion).

Allegiant Drops After Earnings: Decline or Launching Pad?

You are missing the bigger picture, I think. I guess that you are "trader" Mark and not "investor" Mark! I hope you didn't get stopped out yesterday - I added near 40 and see 39 as a more important support level. The stock was down on the drop in the load factor - people looking at trees instead of the forest. They are adding capacity significantly and filling it for the most part.

More importantly, I spent some time on their website confirming their COMPELLING value proposition. The only downside is that their flight schedules are very limited. With that said, someone in the small market can save 50-90% off of service out of their hometown airport and fly non-stop instead of one-stop. Alternatively, they could drive a couple of hours or more and spend more but pick up more selection in flights. I hadn't seen how their booking process works - you can't help but at least consider their hotel, car rental and attractions offerings.

Allegiant Travel: Not Your Typical Airline Stock

Well, it seemed to bounce at 40 area for now - I added some today and made it the largest position in the portfolio I manage. I believe that the weakness was primarily related to the drop in the load factor. Ironically, it is still higher than the "record" that LCC reported today.

I think it's important to understand that they added a ton of capacity and also added a ton of passengers, but the way the math works out it looks like they added too much capacity potentially. I don't think that they did. It may take some time to get the planes back up to the low 90s, but I think that they do just fine even here.

Allegiant Travel Did Not Fly on Earnings

You sound sad to be letting it go - I hope you are dead wrong, as I bought it yesterday. Your comment above - revenue degradation was misconstrued, perhaps by you. They clarified on the call that revenues rose in June from May, just that they didn't rise as much as they would have expected. I like this company - seems totally unappreciated, even hated (high short-interest). The CEO takes no salary and no one gets a bonus unless they have a 5% profit margin. They understand the complex interrelation between fares, capacity and costs - they have my vote for now. You are right though - it needs to hold this area most likely.

20 'Babies with the Bathwater' Stocks for This Week

Perhaps the new environment we are in should lead you to question the validity of your model regarding "strong" fundamentals. Just a question, really, since I don't know how your model works to characterize that attribute. RNT shows up on your list, and I have done proprietary work on that one to suggest that it is an "aids and abetts" consumption of things by people who can't afford them. It would seem that while this worked and could produce "earnings stability" and "growth" in the past, one would have to be very skeptical that it would continue to work. Similarly, I know SRDX very well. I am not sure how you characterize their fundamentals, but their "growth" has been driven by a large deal with MRK that has now been cancelled. In the most recent quarter, though, there was a big boost (at least to GAAP earnings) due to that termination. Rather than debate the details of your model, suffice it to say that these are times when sticking to what has worked in the past is not likely to prove very helpful in my opinion. I have had to totally shift my focus (away from sustainable growth at a reasonable valuation combined with good technicals) to a deeper value strategy focused on only the very best balance sheets. In the past, I liked to buy good charts, now I have to sell them and instead focus on buying oversold stocks that have overreacted to near-term news.