UAL

Analyst Note: Hedge Positions of the Major Network Airlines

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We wanted to provide our subscribers with a brief snapshot of the 2012 hedge positions of the major airlines, should there be an oil price shock in spring 2012 along the lines of what Barron’s outlined in its cover story over the weekend.  United Continental (UAL) United Continental has only hedged 5% of its expected fuel needs for 2012 (Source: UAL’s 1Q 2011 10-Q). AMR Corp. (AMR) We don’t believe AMR has any material hedges for expected fuel consumption in 2012 (Source: AMR’s 1Q Earnings Release). US Airways (LCC) We believe US Airways to be completely unhedged for an oil price shock in 2012 (Source: LCC’s 1Q 10-Q). Delta (DAL) We do not believe Delta has a material hedge position in 2012 … Read more

Ageing Fleets: Which Airline Has the Highest Costs?

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273990-aging-fleets-which-airline-has-the-highest-costs  With jet fuel once again on the rise and the economic environment becoming even more uncertain, it’s informative for airline stock speculators to know which carriers have the oldest fleets. The age (and model) of an aircraft could have large implications on fuel efficiency and ultimately the airline’s cost structure, which becomes absolutely paramount under poor economic conditions. Let’s evaluate the fleets of the Big Four legacy carriers in the U.S. US Airways (LCC) As of the end of last year, US Airways was flying nearly 60 Boeing 737 Classics and 10 legacy 767s that were on average about 21 years old. These Classics and legacy 767s are roughly 15%-20% … Read more

Troubles Loom for Aviation Stocks

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273564-troubles-loom-for-aviation-stocks As many followers of airline equities know, rising jet fuel prices and concerns about the global economy can translate into some fairly poor performance for airline shares. Today, perhaps unsurprisingly, the International Air Transport Association (IATA) cut its profit forecast for the airline industry by more than half to just $4 billion in 2011, (down from the $8.6 billion it had estimated in March). For perspective, the industry earned $18 billion last year. This equates to roughly a 0.7% net margin and raises the probability of yet another year of airline losses. The major causes of this revision are well-known and have been in the headlines for weeks — natural … Read more

Is AMR’s Equity Practically Worthless?

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/270933-is-amrs-equity-practically-worthless As outlined in “Why Airline Stocks Are Not Long-Term Investments,” pegging a fair value on an airline’s equity is a nearly impossible task due to the tremendous operating leverage inherent to their business models and the fact that key valuation drivers such as unit revenue and unit cost are largely out of their control. That said, let’s take a look at what AMR’s equity investors have to overcome to recognize any value in their holdings. AMR’s pension obligations are staggering: ~$24 per share. Unlike peers that passed along their pension obligations to the Pension Benefit Guaranty Corporation via Chapter 11 reorganization (United Continental (UAL), Delta (DAL), etc.), AMR still retains … Read more

The Best Years Are Ahead

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By Brian Nelson, CFA — The wind is at our backs. — The Federal Reserve, Treasury, and regulatory bodies of the U.S. may have no choice but to keep U.S. markets moving higher. The likelihood of the S&P 500 reaching 2,000 ever again seems remote, and I would not be surprised to see 5,000 on the S&P 500 before we see 2,500-3,000, if the latter may be in the cards. The S&P 500 is trading at ~4,100 at the time of this writing. — The high end of our fair value range on the S&P 500 remains just shy of 4,000, but I foresee a massive shift in long-term capital out of traditional bonds into equities this decade (and markets … Read more

Valuentum: Now Bearish, We’ve Been Here Every Step of the Way

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Valuentum Has Been Here Every Step of the Way   From the COVID-19 top in February 2020 to the COVID-19 bottom to the massive bull run through the end of 2021, we’ve been here for you.    2022 started out to be a rough year, catching many by surprise.   But Valuentum stayed positive. When the markets headed south in June, Valuentum stood its ground. On June 14, Valuentum said that “we still believe stocks could make a “huge rebound” in the near term.   We reiterated our views a few days later and on June 19, we said that “investors shouldn’t panic during this bear market” and that “stocks remain an attractive proposition at the moment and a very attractive consideration … Read more

Cisco Rallies Big Time!

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Image shown: Performance of the S&P 500 (SPY) since August 2017. As US equities continue their newly-found volatility, let’s take a look at some recent earnings reports and other developments around the markets. Cisco, the workhorse of both simulated newsletter portfolios, put up a fantastic report and upped its dividend. Berkshire continues to love Apple, and we maintain the view that the 10-year Treasury rate may be the greatest determinant of how well stocks perform in the coming decades. Airlines, garbage stocks, the “gas tax,” and more. By Kris Rosemann and Brian Nelson, CFA Do you know how happy it makes us to say that Cisco (CSCO) has been a staple of both the simulated Best Ideas Newsletter portfolio and … Read more

US Congress Is Getting Ready to Pass a Massive ~$2.2 Trillion Fiscal Stimulus Bill

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Image Shown: US equities have started to recover some of their lost ground as the likelihood that the US Congress will pass a massive ~$2.2 trillion fiscal stimulus and emergency spending package, dubbed the CARES Act, has increased significantly over the past week as seen through the bounce in the SPDR S&P 500 ETF Trust (SPY). President Trump has clearly indicated that he intends to sign such a bill into law as soon as possible, with the US House of Representatives expected to take up the legislation this upcoming Friday morning on March 27. By Callum Turcan On March 25, the US Senate worked late into the night to secure a bipartisan compromise on a massive ~$2.2 trillion fiscal stimulus … 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