HMIN

No Fly Zone: Airlines’ Economic Profitability Still Unproven

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Image Source: Amy McTigue We’ve said it before, and we’ll say it again: the airline industry is not well-suited for long-term investors. The industry that we’re talking about is the airline industry and includes companies such as United Continental (UAL) and JetBlue (JBLU), not the aerospace industry and its constituents such as Boeing (BA) and Precision Castparts (PCP), which are involved in aircraft-making and have fantastic business models. More on commercial aerospace here >> Today, we’re reiterating our view that most airline stocks should be viewed as nothing more than boom-or-bust, speculative vehicles. Perhaps the biggest issue with airlines is that the factors that drive their revenue and costs are largely out of their control. In other words, an airline … Read more

The Correction: The IMF, Oil, Department Stores, and the Fed

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  We’ve been heeding our own words of caution for the past several weeks now, as we’ve trimmed some of the cyclical exposure in both the Best Ideas portfolio and Dividend Growth portfolio. We also added protection to both portfolios several percentage points ago in the form of put option contracts on the S&P 500. These instruments aren’t for everybody, and the put options can still expire worthless if we don’t take profits. The above chart of the SPDR S&P 500 (SPY) shows the ongoing market correction, and we expect to continue to provide daily market commentary in the event that things get considerably worse. Our high-level prognostication is that the broader equity markets will be lower than they are … Read more

Three Huge Red Flags for the Airlines, Hotels

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The airline industry is a good barometer of global economic activity as it not only gauges leisure travel but also business activity. We picked up three important red flags recently that may weigh on shares of the airline group (and by extension the hotel space). For those that don’t know us, we’re not at all fans of the investment prospects of the airline industry, but nonetheless, we pay very close attention to airlines for unique economic insights. Read about our recent call on cyclicals here, in case you missed it. 1. Ebola. According to CNN, the first case of Ebola has been diagnosed in the US. Just like the SARS and West Nile virus before it, the news will likely … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more