I enjoy dabbling in the stock market. I think the whole thing is kinda silly (I recognize that’s an oversimplification), but it’s easy enough to observe some macro trends and buy and sell based on that (if only Elon Musk’s insanity were easier to predict).
Everyone needs a hobby, and for me it’s more fun than going to the casino and playing blackjack.
Airline stocks down amid coronavirus fears
This doesn’t really come as a surprise, but it’s pretty noteworthy the extent to which airline stocks are taking a beating amid coronavirus fears, with one airline in particular reaching the lowest post-Chapter 11 stock price.
As of the time that I’m writing this post:
- American stock is at $20.27, down over 9% today; on February 12 it was at $30.47
- Delta stock is at $46.38, down over 6% today; on February 12 it was at $59.47
- United stock is at $62.45, down over 6% today; on February 12 it was at $82.20
American stock hits post-bankruptcy low
As noted by @xJonNYC, American has been the hardest hit, and their stock has fallen by about a third in the past couple of weeks.
American’s stock is now at an all time low while trading under “AAL” — “AMR” (American’s old ticker symbol) was at this price in September 2013, when the company was still in bankruptcy protection, before the merger with US Airways.
American’s big drop in stock price is in spite of the fact that American has less exposure in Asia than United, for example. To me this points to American probably being the most vulnerable in the US market in the event that coronavirus spreads here.
Anyway, I’m certainly no expert on stocks (and I’m not suggesting anyone should buy or sell stocks, or trying to provide any sort of advice), so I’m purely sharing this because I’m always looking to buy when I think the price is right.
Personally I still don’t think we’ve seen the worst (because I don’t think the US is safe from coronavirus). But for those who think the worst is behind us and who like to buy airline stocks, the massive recent drops in stock prices are worth being aware of…
To those who invest in airline stocks — are you buying now, or do you think it’s getting worse?
https://www.bloomberg.com/news/articles/2020-03-03/berkshire-boosts-delta-air-stake-by-45-million-amid-market-rout
Mark - if only we could buy them with united miles. Thanks to 'dynamic pricing', they have depreciated 50% in the past year.
@Gene..... your post , which hopefully was written as sarcasm , if not , then your 2nd sentence is scientifically totally uncertain and you are irresponsibly giving people false hope , and your last sentence about Trump is reason for people to evacuate the USA.
Can I buy AA stocks with my AAdvantage Miles or for once are my miles worth more than the airline stock?
@Larry: For now, this means practically nothing in terms of points/benefits to the average travel hacker. Going from past experiences, this thing should be wrapped up by June or so. Anyone remember Zika? Ebola? Avian Flu? Swine Flu? SARS? MEARS? Those have faded out of the consciousness of most people unless you're directly involved with NGOs in 3rd world countries.
It does mean that you're going to see some awesome prices for airfare and...
@Larry: For now, this means practically nothing in terms of points/benefits to the average travel hacker. Going from past experiences, this thing should be wrapped up by June or so. Anyone remember Zika? Ebola? Avian Flu? Swine Flu? SARS? MEARS? Those have faded out of the consciousness of most people unless you're directly involved with NGOs in 3rd world countries.
It does mean that you're going to see some awesome prices for airfare and hotels. We've already seen that with international airfares over the past two weeks. It's cheaper to fly around the world than domestic US now.
I'm not sure if it's directly related to Corvid-19, but prices for hotels in Orlando have dropped rather dramatically over the past week, and I see signs that will continue.
Oil prices are dropping, thus gas prices at the pump will be dropping shortly. We should be seeing sub-$2/gallon prices soon...except for Commiefornia, but they brought that upon themselves.
Now...if this thing's still spreading in 12-18 months from now, which isn't likely, then you'll start to see circa-2009 benefits and points offers. I doubt we'll see airline loyalty programs reverting back to distance-only-based programs, but you'll see plenty of tweaks and carrots dangled to get travelers' butts in airline seats and hotel beds. Airlines are much more apt to lower prices than modify their loyalty programs, especially in the short term.
While you focused on the big 3 (American, Delta and United), JetBlue, Alaska and Spirit all have performed worse over the past 5 days than Delta, Southwest and United.
Investors clearly see a preference for quality in situations like this since Delta has held up the best followed by Southwest.
Delta and United both did better today than the Dow which says that airline stocks have probably reached bottoms.
Also, the Dow...
While you focused on the big 3 (American, Delta and United), JetBlue, Alaska and Spirit all have performed worse over the past 5 days than Delta, Southwest and United.
Investors clearly see a preference for quality in situations like this since Delta has held up the best followed by Southwest.
Delta and United both did better today than the Dow which says that airline stocks have probably reached bottoms.
Also, the Dow has lost over 11% over the past week so Delta's loss at 16% actually looks fairly good in the midst of a massive selloff.
The corona virus has simply provided an excuse for a massive reset of sky high valuations but people should not try to assume that airlines are necessarily at much greater risk. Let's keep in mind that China is the world's factory and plants there have been closed for a month and many have not succeeded at getting production going again. Add in S. Korea and the possibility of the situation deteriorating in Japan and huge portions of the world's global manufacturing could be shut down or interrupted. In a consumer spending driven world, that has enormous implications for companies far beyond airlines.
The hysteria around the virus in the western world will pass. China moved painfully slow in recognizing and addressing the problem; not a single other country has or will allow things to get out of control to that extent.
There will be an impact to travel in 2020 but this is not the disaster in the making that some portray.
I sold a covered equity out on AAL at $20 and also will pick up more if it drops below that. I’ve been stop lossed out of a number of positions this week (all w gains) and have a good bit of cash sitting in my account. Personally I plan to start buying again (in 500-1000 share blocks not all at once) since I think today marked panic and over sold situation with the upside...
I sold a covered equity out on AAL at $20 and also will pick up more if it drops below that. I’ve been stop lossed out of a number of positions this week (all w gains) and have a good bit of cash sitting in my account. Personally I plan to start buying again (in 500-1000 share blocks not all at once) since I think today marked panic and over sold situation with the upside better than the downside. Sure may go down another couple 1000 points (and I will buy more) but I take a long term view and have sufficient cash and other assets to wait it out. Also have a sizable muni bond portfolio and other income producing assets to balance things out.
Just my opinion but I’m a pretty aggressive investor (went on margin to add to positions in 2008 at the bottom for example) and it has really paid off.
Again thinking long term you really can’t lose owning a broad portfolio of stocks
If the worst happens, and all the airlines risk going belly-up at the same time, the smart play would be to buy them at near-zero and hope for a bailout similar to after 9/11.
Just remember that stock prices CAN go to zero. I personally wouldn’t buy any airline stock now. I am keeping my eyes on amazon and Costco.
AA having least exposure to virus and most % drop can only say one thing.
Doug Parker is the virus.
Buying individual stocks is very much akin to gambling - something to do if you enjoy the fun of it but not something I personally do.
I'd much rather buy index or mutual funds which outperform most other ways of investing and don't require constant attention.
Plenty of other events out of our control that can affect airline prices unexpectedly.
Why on earth would anyone by buying right now? If this hits NYC the market will really tank and then there'll be some great bargains on sale. Wait.
Buy, buy, buy!!!! The fundamentals have not changed. It is a panic that happened before with SARS and others. None of these companies got bad from night to day, people will travel once this virus is gone and so stocks will climB up again.
We could see bankruptcies again if things spiral
All major companies are cancelling all travel = front of every plane is empty
Even if corona lightens up, companies might decide that web teleconference is good enough. That is, demand never returns to 2019 highs.
With their fleet plans all designed around rapid growth in flying, airlines find themselves in quite a pickle.
Ben -- it would be interesting to try to get some perspective on what this sort of situation means for points and miles enthusiasts?
Posts about the markets end up clouding the issue because they invariably run into everyone with an opinion speculating and explaining why they are smarter than markets, and they inevitably lead to political crap.
The more interesting questions to me -- and the ones closer to your core area of...
Ben -- it would be interesting to try to get some perspective on what this sort of situation means for points and miles enthusiasts?
Posts about the markets end up clouding the issue because they invariably run into everyone with an opinion speculating and explaining why they are smarter than markets, and they inevitably lead to political crap.
The more interesting questions to me -- and the ones closer to your core area of expertise -- are what this all means for those of us with points and miles. It's very easy to think that market is the economy. It isn't. So, that distinction needs to be drawn at the outset. But let's assume there is a correlation -- let's say the market is informed and is successfully predicting that revenues will be down for the airlines. Or at least that the airlines are starting to worry about that. Or even that it will be a self-fulfilling prophecy.
Or whatever. Don't fight the hypothetical. Now, the question is, how will the airlines need to react? Is the answer anything that is of interest to us? Do they need to do things to increase their revenues from the banks who buy their miles? Do they take measures that are helpful or hurtful to those who would use miles or are looking for bargains to get short term cash.
These are the questions I'm interested in.
Investing in a single equity is always risky. Investing in an airline stock now is like playing with fire.
There is an ETF made up of airline stocks, ticker symbol JETS. Top 4 holdings make up 48% of the portfolio are LUV, AAL, DAL, and UAL. The top 10 makes up 70% of the portfolio and includes only US airlines. It might be a little less risky than investing in one single equity.
"But for those who think the worst is behind us and who like to buy airline stocks, the massive recent drops in stock prices are worth being aware of…"
Reminds me of the day in 2008 when the guy I was traveling with said that he thought AIG was a "buy" after it had fallen 60% from its highs (for those who don't remember, it dropped 97% and has never recovered). These airlines still have...
"But for those who think the worst is behind us and who like to buy airline stocks, the massive recent drops in stock prices are worth being aware of…"
Reminds me of the day in 2008 when the guy I was traveling with said that he thought AIG was a "buy" after it had fallen 60% from its highs (for those who don't remember, it dropped 97% and has never recovered). These airlines still have plenty of room to run in the wrong direction. They are highly cyclical companies, entirely economy dependent and are, generally, very poorly run. I wouldn't buy them with your money.
My entry point at AAL is $10.
For GOL it's $5
For SAVE it's $25 (almost there)
For United: $ 0.001
I for one have completely panicked. This virus makes Zombie Apocalypse Viruses look tame. If you haven't traded in all your stocks and bonds for cases of bottled water and dried food, get on it.
This is what happens when a virus goes viral.
Of the 3 $AAL has the largest short interest for reasons beyond coronavirus, among other factors, which would tell the larger drop rather than it being a tell they're considered more impacted due to coronavirus over others.
None of the airlines are in distressed positions and Berkshire is already at the 10% level which limits maneuverability, but it'll be interesting to see if something like $LUV comes into play, but more likely something on the...
Of the 3 $AAL has the largest short interest for reasons beyond coronavirus, among other factors, which would tell the larger drop rather than it being a tell they're considered more impacted due to coronavirus over others.
None of the airlines are in distressed positions and Berkshire is already at the 10% level which limits maneuverability, but it'll be interesting to see if something like $LUV comes into play, but more likely something on the debt side if there is a cash crunch.
@ Ben -- Cases are dropping. Will be over when it gets warmer. Trump will get re-elected, and we will all live happily ever after. Amen.
$10 says we get a Gary Leff post within the next week that reminds everyone about Dougie Parker's claims from ~18 months ago that AA will never lose money again.
the shorts are coming in from illegal AA account terminations
I’d be in the market for DL if the time is right, but that’s only because I think they’re well managed and are not likely looking at a bankruptcy. AA is not well-managed, their balance sheet sucks (compared to DL), and a huge further drop off in traffic could very well force them into bankruptcy.
As far as airlines are concerned we’ve only begun to see this all play out.
I sold my stocks in anticipation of this happening, but it's going to be easy money soon. Buy the fear - these will all be up 15-20% minimum by end of year.
Dabbling in points and miles is much more silly than dabbling in the stock market.
It probably will go as low as $10-12 when the virus hits. It probably already has, but nobody is testing, so It will hit harder, as it’s not been contained.
I would pick up some shares of American under $10. I’ll bet the house if bitcoin goes below $4,000.
Donald T is angry.