To state the obvious, this blog isn’t about investing (well, other than ”investing” in your points balance), though I do often discuss airline economics, and sometimes the topic of airline stocks comes up.
Continue reading: The Case For Buying Airline Stocks: The “Down 30 In 30” Trading Rule, And More
Share your questions, experiences, and thoughts below.
Very simple concept that some people struggle for years to understand until they eventually learn from experience (and probably some never internalize this):
Everything you think you know or can predict about a financial asset’s future performance is already priced in.
That’s it. Every possible idea has already been thought of, traded upon, and the now-current price already reflects that.
Unless you have inside information (which is illegal) or are a member of congress, don’t delude yourself into imagining that you’re a special sort of clever.
In the long run airline stocks are a good way to become a millionaire. Only caveat is you have to start with a billion.
Think our legacy airlines are more credit card businesses than actual airlines. They lose money on flying people around.unless you are AA and you still barely make money.
@Ben Schlappig
Economist John Maynard Keynes famously noted, "The market can remain irrational longer than you can remain solvent."
So you can be correct but still not come out ahead financially.
Have you heard of the Bogleheads?
There are often buyers for United, Delta, and Southwest, but not American because UA, DL, WN are part of the S&P 500. So buy a 500 index fund and you own UA, DL, WN.
Apparently MNL airport operators are forcing CX to close their lounge.
Could be an interesting article considering it's the best lounge by far in that hellhole of infrastructure
To quote:
There are two types of people.
Those that can’t market time and those that don’t know they can’t market time.
@Simon , the quote about irrationality is very wise but probably less relevant today than it used to be. Algorithmic trading quickly amplifies any subjectivity that pricing in inevitably entails which means that there's more overcorrection nowadays than what you might've seen in the past. You didn't need to be a commodities guru back in March 2020 to realise that oil prices can't stay negative (!) for too long. This isn't even about timing the market, it's about value investment - similarly, there are quite a few decent companies in the S&P 500 but the massive growth in index funds means that their shares are quite expensive because everyone is buying them. Trying to make money timing the market is unlikely to work for the average person, and doing so with borrowed money/leverage may lead to financial ruin, but it is possible to lock in decent entry points for those wanting to buy and hold.
I still wouldn't invest in airlines though - as with things like crypto, I think that the regulatory risks aren't properly reflected in their share prices. Changes to frameworks such as open skies agreements are outside of an airline's control and could have serious consequences on its viability- or just ask Finnair how they're getting on with their business model of connecting Europe with Asia via the Russian airspace!
@Simon
Have you heard of this useless electronic medium that people suddenly assign absurd valuations to it called bitcoins.
every investment is about timing and a track record.
UA gained as much post covid because it was the so badly managed for so long. and then it hit the ceiling which is below parity with DL
and yet UA doesn't make as much revenue or have a market cap as high as DL even though UA flies 10% more ASMs.
DL has demonstrated over the past decade plus that it is the best run airline worldwide and has the market cap to prove it.
Over the past year, DAL stock is up 68% which beats the rest of the US airline industry and most major indices.
and it will be the refinery and MRO businesses that will give DL a combination of advantages which no other airline can match
Yes, I have heard of Bitcoin...I'm not sure I understand the point - is it that Bitcoin's value has been irrational for as long as it has without any expectation of crashing to zero?
let's not forget that DAL and LUV are the only 2 US airlines that pay dividends and there are some investors that seek out dividend paying stocks.
If we know anything about flight, it’s that things can only go up, and they stay up forever. For-eva-eva!
"100% return over that period, compared to the stock price today. Pretty great, eh?"
Um, compared to what? 100% return is what Micron achieves every month. You need to look at risk-adjusted returns.
Bob Crandall, former CEO of AA, stated that airlines were a great place to work.
However, he discouraged his employees from investing in airlines calling it a "nasty, rotten business."
Enough said!!
Stock market bulls excrement is now your mantra Walter? I know little about the U.S. Airline stocks market. I know only a little more about the World Class Airlines stocks we hold, however, I am always willing to learn from your experience Walter, do prattle on and give us all the benefit of your vast knowledge?
Except, there is a lot of evidence against this argument for semi-strong market efficiency (and some the opposite direction that private information is impounded in the current price). But, these studies find the inefficiency is not exploitable. And, obviously, if one found a way to exploit those inefficiencies, others would copy. This is why a majority of my non-retirement and all my retirement savings are in broad-market etfs and funds. I laugh at those who pay 1% or more on AUM to advisors, when the clear-cut evidence is they don't beat the market regularly in the long-run particularly when one deducts the management fees.* Still, is Buffet just a statistical outlier? Everybody wishes they invested in Berkshire decades ago.
*My observation relates to advisors managing low 8-digit portfolios and less. Things might be different with 9-plus-digit portfolios---I don't know.
The rational me follows a policy of putting my retirement and non-retirement investments in etfs and funds that follow the broad market (e.g., Buffet will have his wife's Inheritance put in an SP500 ETF). I allow the playful me have a small portion of my non-retirement funds for speculation (small potatoes) . Twenty months or so ago, people here and elsewhere were bashing Boeing with stupid reasoning. I bought some. It's up 48%. Same thing about Southwest a year ago. My investment is up 28% before considering dividends. Yes, PAPER profits. But, betting against the smug, opinionated, loud mouthed element here and at other travel blogs seems a good strategy. It's better than going to Vegas.
The case for buying airline stocks is best expressed by those who bought PanAm and Spirit : Fools .
Well golly-gee! Delta Airlines pays less than 1% dividend, while Southwest Airlines are paying just a little more at 1%. Contrast this with say Singapore Airlines who are paying between 4-5%, or even BA (IAG) of 2%.
Not a lot to crow about Walter …. right?
Albert are you calling me a fool? I hold a number of different airlines stocks, but only World Class Airlines actually. No U.S. third world airlines holdings.
@This comes to mind
Regulation Fair Disclosure (Reg FD), adopted by the SEC in August 2000 and effective October 2000, prohibited companies from selectively disclosing material non-public information to favored analysts, investors, or others without simultaneous public release. It aimed to level the information playing field.
Prior to that, Buffet had about double the performance of the market. After that, his edge totally disappeared.
Source: 2/14/26 episode of the All-In Podcast
Boeing profits come from manufacturing mass killing machines.
From missiles to MAXs.
And boy did Benny used a lot of missiles in the past year.