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  • American Airlines Investors Are Ignoring Major Risks To The Company [View article]
    Let's add historically low interest rates as another huge positive. The legacy carriers, and particularly AAL, are updating their fleets and financing at low rates. Planes can last 20-30 years in some cases, and AAL's fleet is now very new and efficient.
    Jun 23, 2015. 10:17 AM | Likes Like |Link to Comment
  • American Airlines: Patience Is A Virtue [View article]
    Harm, a lot of great points in the article, and I think good balance, too. My one big point would be that the PE is backward looking, and since that was when oil was at a much higher price, it could be very deceiving to look at backward numbers here. AAL was using roughly 360 million gallons a month last year, so a $1 drop in fuel prices equates to over $4 billion a year! Nobody is even considering that AAL (and the other majors) had profitable models at $100 oil because of the restructuring that you detail above. So, the $4 billion is extra cash. Fracking, cost restructuring, historically low rates, and a modest recovery make airlines a buy imo. They may be great investments for the next five years. Your list of risks is certainly valid, but I think Mr. Market is discounting the *possibility* of these risks, and ignoring the *reality* of lower oil, lower rates, higher load factors, and limited capacity.
    Jun 23, 2015. 08:47 AM | 2 Likes Like |Link to Comment
  • China Automotive Systems: Free Cash Flow, Growth, And No Debt [View article]
    I like this company, too. Just like you, I appreciate their global focus and their R&D. Having big auto companies as customers also validates their legitimacy as a business. My one concern, is financial management. I hope they can manage their finances well and reward their shareholders rather than fleecing them. I own the stock, too.
    Jun 23, 2015. 07:27 AM | 2 Likes Like |Link to Comment
  • REITs That Pay Monthly [View article]
    Brad, my kind of timing on the secondary! Question: do you think the extra shares put the divvy at greater risk? That puts the payout at close to 100%, doesn't it? Or, do you think they will quickly use the funds to increase the FFO commensurately. Thx.
    Jun 23, 2015. 07:22 AM | 2 Likes Like |Link to Comment
  • American Airlines Investors Are Ignoring Major Risks To The Company [View article]
    tut, well said. If AAL was selling for the same forward PE as the S&P 500, I would agree with his thesis, but it isn't anywhere close. If AAL had the same forward PE as the S&P500, it would be ~155. That is not a typo. 155 is what AAL would be selling for today with comparable valuations to other companies. That is where the author fails his readers. This piece is essentially like running into a theater, talking about how dangerous theaters are during fires, and then yelling fire when there is no fire. In fact, the theater is doing great and has exits built to code and there is a fire truck sitting in the parking lot at the moment. AAL is, imo, a screaming buy. This piece is just one more bit of evidence that airlines are among the most hated investments in the history of the stock market. AAL is selling at almost a 75% discount to the S&P 500. That is a remarkable discount. Even if profits drop 75%, it isn't overvalued relative to other companies.
    Jun 23, 2015. 07:09 AM | 5 Likes Like |Link to Comment
  • American Airlines Group leads airline sector higher [View news story]
    The irrational drop in the airlines reminds me of Apple's drop, too, flicks. Except, this one is even more ridiculous. There were plenty of people saying Apple would keep dropping to the high 200s then (that would be roughly the $30s now, post split). When you let good and profitable companies get down to 4-5 X earnings, there is just too much they can do with the cash; the stock price has tremendous pressure to rise. If disaster doesn't strike and oil stays in the 60-80 range, as I expect, AAL and UAL should be multi-baggers over the next three years. The street is as pessimistic on these names as I have ever seen for any stock over my investing career. Horrible despair, gloom and pessimism make many argue that AAL is overpriced at 4-5 X this year's earnings.
    Jun 22, 2015. 05:52 PM | 2 Likes Like |Link to Comment
  • American Airlines Group leads airline sector higher [View news story]
    Just to put it in perspective, AAL would be trading at ~$155 today if it had the exact same forward PE as the S&P 500. No doubt it should have a discount, but 27%--almost 75% off--is ridiculous. UAL is similarly mispriced.
    Jun 22, 2015. 11:16 AM | 1 Like Like |Link to Comment
  • United Continental: An Undervalued Stock With Strong Upside Potential [View article]
    I agree UAL is insanely cheap! Thx for pointing it out. AAL is just as cheap, too. I like this point: both of these companies are cheap even if we only count this quarter's earnings and don't even count the other three quarter's numbers in their estimates! IOW, the major market averages have much higher prices on forward PE estimates for all of 2015 than AAL and UAL have just on this quarter's estimates!
    Jun 22, 2015. 05:44 AM | Likes Like |Link to Comment
  • Good Times Restaurants Just Announced A Huge Bump Up And Nobody Noticed [View article]
    Back of the envelope, and assuming YHOO's numbers are right, I come up with the following (rounded and rough): with MCD's forward P/S we would be in the ~20s, and with SHAK's forward P/S we would be in the ~60s. GTIM has a long, long way to run if they execute and manage the growth well. Having two synergistic and winning concepts should command a much higher valuation than we have today. BTW, growth has accelerated on a massive scale. I was figuring around 40% before the acceleration.
    Jun 22, 2015. 05:30 AM | 2 Likes Like |Link to Comment
  • Opportunities Ahead For American Airlines [View article]
    Steve, after looking at your profile, I think you have a uniquely well informed perspective on the airlines. Thanks for commenting!
    Jun 4, 2015. 07:27 PM | Likes Like |Link to Comment
  • Opportunities Ahead For American Airlines [View article]
    I'll give you two for the price of one, Harm: valuation and profits. Profits have changed dramatically, and valuations don't reflect that. AAL is trading at a lower price than last year when oil was $95 a barrel and estimates were almost half of current numbers. AAL is selling for less than 15 times this *quarter's* earnings, as opposed to the average S&P 500 stock, which is selling for almost 19 times this *year's* estimates! So, let's review a bit: aviation went from the period of regulation, to the period of the asset raiders (airlines had a lot of hidden value, and the raiders cashed that in, often at the expense of the businesses), followed by the period of mass and sometimes mindless expansion, followed by 9/11 and mass bankruptcy. The airline industry was attacked by foreign terrorists and the US Government failed to protect them. Revenues were off by huge percentages in the following quarters and years--few businesses could survive an attack like that, with subsequent revenue implosions. Fast forwarding to today, they have emerged in a more rational business environment--not a perfect one, but a more rational one. Just like people who were burned by the bank blowouts in '08, or the tech bubble in '00, airlines have left a trail of wounded skeptics. As you know, a contrarian looks for emotional, herd mentality to find incorrectly priced assets. I think we have a classic case in the airlines. People act like 3 times earnings is where AAL should trade. I'm not saying the airlines will displace Google and Apple, but I think they have a good business model. It does have unique risks, but I think that the market will come to value them more highly over the next five years. So, the very, very low valuation will inflate a bit as people realize they are legitimate businesses, and I think the general market is overvalued if rates go back up. One asset is grossly underpriced and the other is fairly valued to overpriced, and that is why I think airlines will outperform. Thanks for asking!
    Jun 3, 2015. 08:58 PM | 3 Likes Like |Link to Comment
  • Opportunities Ahead For American Airlines [View article]
    To a $50 price target, but considering they want you to take your cash and go buy some company at 18X this year's earnings, AAL at less than 15X this *quarter's* estimates, looks to be dirt cheap--maybe cheaper.
    Jun 3, 2015. 10:40 AM | 5 Likes Like |Link to Comment
  • Southwest CEO pulls up airline sector with comments [View news story]
    The new Price Target is also $50. The airlines are making so much money, too, that you have to expect somebody to lower prices a little. Only an airline could be projected to earn almost $10 a share (up close to 100%), and then we read nothing but gloom and doom! BTW, the current price is less than 15X this *quarter's* estimated earnings! AAL is much cheaper than the S&P 500's annual earnings estimate, but AAL is using just one quarter's earnings.
    Jun 3, 2015. 09:42 AM | Likes Like |Link to Comment
  • Behold The Power Of Buybacks And Dividends [View article]
    Great article! AAL is just up to ~4.5 X this year's earnings estimate today, and it could have made it into the 3s recently, depending on how earnings pan out! Maybe you wrote the article a while back? Seldom has any stock been this cheap. I am a huge fan of disciplined buybacks, especially when Mr. Market is giving away a stock. Let's take AAL. If you bought into a carwash up the street that was selling for 4.5 times earnings, buying back shares would make you the sole owner over time. You keep your shares and divvys while the company buys itself out of cash flow! What a deal. Also, they can increase the dividend by the same amount that the buyback reduces the shares with no increase in payout. Let's say profits stay strong and AAL can buy back 5% per year. Now they can increase the dividend by a little over 5% per year for "free." More compounding magic. Take a look at Apple. The only danger, imo, is that companies might be tempted to stop investing in employees and the business to up buybacks and divvys. That is horrible long term management, and this temptation has probably ruined many once-great companies. Like so many things in life, balance is the key.
    Jun 3, 2015. 06:33 AM | Likes Like |Link to Comment
  • Opportunities Ahead For American Airlines [View article]
    Solid points. Sometimes we focus solely on financials, but these are the types of issues that drive financials. American has a tremendous amount of work to do, but they should have the cash to do it, for the first time in a very long drought. Many of these issues are on their way to being fixed already, too, like the fleet upgrade. Some people might ridicule your $100+ PT, but if you simply multiply the expected earnings for this year, $9.69, times the average multiple for the S&P 500, we get about $175 today. $100 a share is just over half price, compared to the *average* stock on the S&P 500! It is hard to find a more hated group of stocks--ever--than airlines. While they do have many unique risks, the contrarian in me tells me this group is very likely to outperform the S&P 500 over the next five by a dramatic amount. GLTA.
    Jun 3, 2015. 05:30 AM | 5 Likes Like |Link to Comment