"Price is what you pay. Value is what you get." - Warren Buffett
Barron's had an article on Spirit Airlines (SAVE) in this weekend's magazine that I found interesting. The piece projected this small airline stock could climb some 60% if competition eases back a bit. A rationalization in the airline industry has the potential to bring the focus of investors back on valuation to the benefit of Spirit as noted in the analysis.
I am getting increasingly more interested in the airline stocks after a recent decline has brought many down 25% to 30% from their 52-week highs. Thanks to myriad mergers in recent years, there are far fewer airlines than in years past meaning greater pricing discipline and less capacity growth. Both very helpful for the bottom line.
In addition, jet fuel costs are much lower than in recent quarters thanks to the collapse in crude prices since the summer of 2014. Given worldwide demand is at the lowest levels since 2009, oil could stay much lower for at least several quarters or years. Labor strife also seems to have declined in recent years within the industy.
The domestic economy is also expected to pick up and deliver ~2.5% GDP growth in the second half of the year, a nice rise from the anemic ~1% pace of the past three quarters which should be beneficial to the industry. Finally, valuations are very compelling here with the market selling at almost 20 times earnings.
My favorite airline stock right now is Delta Airlines (DAL) which posted a solid ~5% gain this week. The stock sells for seven times earnings and also yields slightly over two percent as well. Significantly, two insiders made a total of over $1 million in new stock purchases in June which is the reason the shares are one of the 15 holdings in the Insiders Forum portfolio.
Southwest Airlines (LUV) also saw a pick up of insider buying in August and goes for less than 10 times earnings. Just an investment thought to ponder over the weekend.
Note:I also put out more granular and free 7-10 page investment reports several times a month. These go into deeper analysis on the some of the more intriguing stocks and trends in the lucrative but volatile biotech sector of the market which I have been following and investing successfully in for more than two decades. To get these reports delivered directly to your "in" box when published, just register for free at bretjenseninvests.com.
We have done this for almost five months now. Our best pick so far is Exelixis (EXEL) which is up more than 200% since we profiled it at ~$4.50 a share in early May.
Relypsa (RLYP) the subject of one of our first investment reports was bought out on July 21st for a 60% premium by Galencia.
Our latest report is on a promising biopharma that several analyst firms believed could more than double in the year ahead and that just filed its first NDA in September. It came out recently and the stock has indeed almost doubled since and can still be found here.
Our next report will be sent out on another promising small biotech stock in the middle of the upcoming week.
Thank You & Happy Hunting
Bret Jensen
Founder, Biotech Forum