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  • 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
  • Retired Or Soon To Be? Here's A Back Test You Need To Review [View article]
    Thx, Dave! Interesting...
    Jun 2, 2015. 08:59 PM | Likes Like |Link to Comment
  • Southwest CEO pulls up airline sector with comments [View news story]
    Just for grins, the forward PE of the S&P 500 was 18.25 as of Friday based on estimates. The forward estimate for AAL is 9.69 for this year. 9.69 X 18.25=$176.84! Although it isn't a perfect comparison, it shows just how low AAL is being valued compared to the average stock in the S&P 500. Put a high flyer's PE in and you could easily get into the $300s. My guess is that the airlines will outperform most other sectors moving forward.
    Jun 1, 2015. 07:41 PM | 3 Likes Like |Link to Comment
  • Southwest CEO pulls up airline sector with comments [View news story]
    For anybody who wants to talk about efficient markets....the reaction here has been absurd. LUV tipped an extra 1% capacity, which would have made little to no difference, and the airlines plunge through their ridiculously low 200 DMAs--AAL could have made it down to a 3 handle on PE for *this* year's earnings. How do you justify 3.9 X earnings for most any company? AAL should at least be in the 60s, along with DAL, and UAL should be higher than that. However, even that is a ridiculous and irrational discount imo.
    Jun 1, 2015. 04:20 PM | 10 Likes Like |Link to Comment
  • Retired Or Soon To Be? Here's A Back Test You Need To Review [View article]
    Dave, thx. My thought is that most investors, and especially DGI investors, are quite happy with a fairly normal market. The lesson learned from Dave's investing example is to hang in there, and good companies will often come roaring back. However, when your balance is down 30%-50% it takes a lot of fortitude to ride it out. Showing how low it got might help to illustrate both the temptation and perils of selling. BAC had a great divvy and it was selling up to the 50s--it lost about 90% of its value. I think it is interesting to just read the currents on the investing websites. At bottoms, you see a lot of stories about crashes and how B&H is dead. In healthier markets, you see a lot of stories about DGI, how much Warren Buffett makes in the stock market, and what the next great company/sector is going to be. I think it is good to study the extremes, so you know what to do ahead of time. Looking at how low Dave's portfolio would have gotten in '09 would also be a good argument for diversification and having some cash to add to your dividends, so you can buy more at bottoms. But, as I said, I thought it was a nice illustration as it was.
    May 30, 2015. 04:27 PM | 2 Likes Like |Link to Comment
  • American Airlines: The Most Undervalued Company Of The Airline Industry And S&P 500 [View article]
    1) - Investing in airlines, even solid ones, is very contrarian. Therefore, you get in at a huge discount.
    2) - They dealt with this in the CC. Basically, the comparison is between low cost, long term debt and leasing, and they think debt is better. Interest was still less than a billion a year. So, the debt is easily covered by a 42Bn dollar company.
    3) - Three possibilities. Oil up; oil down; oil sideways. Hedging saves money in one of the three possibilities--oil up. Hedging loses money in two-thirds of the possibilities. If airline execs could accurately predict oil prices, they would do better to sell the planes and make billions on commodity speculation. They can't, and AALs strategy has been the winner.
    I haven't followed Parker like many here seem to have, but AAL has made a lot of solid decisions over the last year or two. They are beating other airlines on oil price, fleet updating (I think they will soon have the youngest fleet), buying stock on large dips in price (most companies do a bad job of buying panic), and refinancing high cost debt. They have been looking very shrewd since I have been watching. Airlines do have a lot of varied risk, but the price here is lower than last year when AAL was making a lot less money and oil was $95 barrel. The panic and price are both irrational imo.
    May 29, 2015. 12:34 PM | 4 Likes Like |Link to Comment
  • American Airlines: The Most Undervalued Company Of The Airline Industry And S&P 500 [View article]
    MJM, I don't get it. Apple could be accused of oligopoly status, but I wouldn't say that about the airlines. First of all, there are three. How many big US cellphone makers are there? Plus Southwest, Spirit, Jetblue, Alaska, Hawaiian, and many other offer a lot of competition. Apple is making way more money than the airlines, yet people seem to worry about the "oligopoly" any time the airlines turn a profit. I don't understand that. Also, AAL is selling for 3.5-5X this year's earnings because of the panic over unrestrained competition! Southwest said they were going to raise capacity up to 1% over the previous plan and Mr. Market checked into the hospital for depression over the competition in the air.
    May 29, 2015. 11:49 AM | 2 Likes Like |Link to Comment
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