GOL

United’s Passenger Debacle An Immaterial Investment Consideration

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Image Source: Business Insider  The major airlines in the US have done a fantastic job capitalizing on the ongoing upswing in air travel demand, but their economically-sensitive business models remain the most operationally-leveraged out of any industry group in our coverage. This should be investors’ biggest concern: A downturn in the global economy and competitive pricing pressures are far greater worries for investors than United’s recent passenger debacle. However, as with many news-oriented items (as opposed to materially-relevant, investment-related items), United’s misstep is making headlines in a big way. Though the footage in this article is appalling, investors in airline stocks have much more important things to worry about, in our view. By Brian Nelson, CFA The airline industry has … Read more

Warren Buffett Is Back Into Airlines, Should You?

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Warren Buffett has changed his mind about airline stocks… In this 10-minute podcast, the Valuentum analyst team talks all about the hazards of the airline business model from substantial operating leverage to the risks of volatile jet fuel costs to bankruptcies and beyond. The team also highlights the long-term passenger growth prospects of the sector, and recent consolidation that has brewed a more optimistic tone from industry observers. To view Valuentum’s updated YouTube page, please see here. Ticckerized for airline-related equities around the globe. Brian Nelson, CFA: The worst sort of business is one that grows rapidly requires significant capital to engender the growth and then earns little or no money. Think airlines. There’s a durable competitive advantage that has proven … Read more

Yikes! Brazil’s Real Plunges; Protests in Hong Kong

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Recession worries in Brazil (EWZ) sent the Brazilian real to a five-year low after poll results showed President Dima Rousseff gaining a lead over candidate Marina Silva, according to Bloomberg. Dropping a couple percent versus the US dollar today, its biggest one-day drop in three years, the Brazilian real has fallen more than 10% during the third quarter. Many had hoped a new government would spur economic growth in the country. The Brazilian economy is an important one, a component of the faster-growing BRIC nations, and many firms in our coverage universe are dependent on its resilience. This could potentially compound problems in Latin America, with Argentina defaulting on its debt earlier this year. Fundamentals at PetroBras (PBR), Gol Linhas … Read more

Merger Mania in the Brazilian Air Travel Market: A Net Positive

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/278846-merger-mania-in-the-brazilian-air-travel-market-a-net-positive As long-time followers of Valuentum know, we’re not too fond of airline stocks. Essentially, we view them as merely a speculative bet on the trajectory of economic growth and the direction of jet fuel prices. But while the price of black gold remains largely out of airline executives’ control, it’s hard not to like the economic growth prospects of the Brazilian air travel market, which has been on a tear during the past several years thanks in part to heavy discounts on fares offered by low-cost carriers such as Gol (GOL). Plus, the 2014 World Cup and the 2016 Olympics, both to be held in Brazil, will serve as temporary and … Read more

Structural Changes in the Airline and Aerospace Business

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Image Source: Valuentum A version of this article appeared on our website April 28, 2021. By Brian Nelson, CFA The coronavirus pandemic (“COVID-19”) has fundamentally changed how companies do business. Zoom Video (ZM) has made in-person meetings largely redundant while innovative digital-agreement firms such as DocuSign (DOCU) have only contributed to the “anywhere economy.” Though there may be pent-up demand for in-person meetings and handshake agreements as the number of vaccinations for COVID-19 increase across the globe, many businesses may grow to permanently embrace the “anywhere economy” for its efficiencies and cost savings. This will impact the long-term trajectory of business air travel demand, in our opinion, with implications on the normalized intrinsic values of airlines (JETS), jet makers, and … Read more

Still Bullish — Stocks for the Long Run!

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Excuses not to pick stocks are only exposing biases these days. By Brian Nelson, CFA The S&P 500 (SPY), Dow Jones Industrial Average (DIA) and Nasdaq (QQQ) continue to hover near all-time highs, and all appears well. We maintain our bullish take on the markets and believe that we are in the early innings of a long bull market that started following the washout March 2020 during the depths of the COVID-19 meltdown. Stock bull markets tend to average about 4.4 years in duration, with the last one enduring ~11 years, while bear markets are very abrupt, lasting only 11.3 months on average, the last one a very short 1.1 months, according to data from First Trust. We’re about 15 … Read more