3 Speculative Picks from the Airline Industry
by Renee O'Farrell
The opportunity in the airline industry is a hard thing to pass up. The airline industry is fairly small, at least in terms of players. It is really closer to an oligarchy-- there are a handful of major players and barriers to entry are high. It is almost like investing in the personal computing industry. Sure, there are some companies, like Acer, that have some measure of flooding in the industry. But, for the most part, when someone goes to buy a computer, he or she is going to be looking at an Apple (AAPL), a DELL (DELL) or HP (HPQ). The same is true with airlines. When you go to book a flight, odds are you're going to be looking at either Delta (DAL), United Continental (UAL) or US Airways (LCC).
Moreover, people love to travel, and for many, the economy means that they couldn't afford to. As things rebound financially, more will be booking that flight that got put off -- and airline share prices reflect this. Looking solely at the three major airlines in the United States, each company on this list represents a good investment opportunity. They have returned over 24% year to date and are priced at less than 5 times their forward earnings. They also have strong expected earnings growth.
Delta is the largest of the companies on this list, with a market cap of $9.20 billion. The stock is currently trading at less than $11 a share, meaning that it is priced at only 4.25 times forward earnings. To date, the stock has returned almost 35%.
If analysts are correct and the company is able to increase its earnings by an average of 17.25% a year over the next 5 years, there is still room for this stock to run. I highly recommend the stock as a buy.
3 Speculative Picks From The Airline Industry - Seeking Alpha