Airline Stocks Time to Buy? (05.08.20)

2개월 전

I got a little FOMO going on with airline stocks. Since this week major indexes have been running up airline stocks started out flat footed with Warren Buffet announcing he sold all his airline shares. However airlines have recovered a bit and are up for the week. So I decided to take a look at entry point into airline stocks and which to invest in. Within hours of after looking charts I went back to after hours headlines and again on a Friday afternoon something negative regarding airlines was spreading. This time United Airlines was unable to secure a loan which foretells what Buffet had feared.

If the airlines are unable to borrow money in times like this it will only be a matter of time before they dilute their shares by doing offerings or sell assets leaving less of a company. The past month we have heard many high yield corporate bonds were able to receive above level of purchases, YUM Brand and Ford are two examples. Yet now United was unable to continue the streak even with a corporate bond yielding more than 9%. This has made me side step on any purchases of airline stocks in the foreseeable future. There is simply too much head winds to deal with and airlines were not that strong to being with when Covid-19 hit.

Other Reasons for not Investing in Airlines Just Yet



Robinhood app which allows trading stocks and crypto had a statistics on most popular stocks their traders are invested in. Airlines were among some of the most popular. This is a good indicator that retail investors are heavily invested in airlines stocks as prices goes down. This approach is likely because they think airline stocks look cheap hence a bargain to invest in, but what is to say these stocks can not go any lower or even become worthless.


More and more investors/traders are buying into airline stocks yet prices continue to decline. Even price charts sure look like catching a falling knife. There is not much good too see here with airline stocks.


If there is one element in favor for bulls it will be that there is currently a large amount of shorts on airlines.
<a href'"https://markets.businessinsider.com/news/stocks/airline-stocks-short-sellers-millions-day-buffett-comments-sold-shares-2020-5-1029166407">$3.17 billion shorting on airlines. From a technical standpoint if any bad news on airlines would not make them drop further in price but rise it will likely create a short squeeze very similar to what we are seeing in overall markets. Yet even with this info and the fact that market indexes have rallied over 50% of its losses from March bottom, airlines stocks are still close to there March bottoms and some lower.

Another good data indicator to go long airline stocks is passengers going through TSA. The numbers have been daunting for the past month but recently there has been an uptick. Still comparatively speaking airlines are still under 10% in passengers as compared to what they had last year. As summer months begin and if the virus continues its spread in the USA without flatting the curve I fear even any increase in passengers will not offset the continuous loss in revenue for airlines.

Disclaimer:

I am not a financial advisor and all this post information is for entertainment purposes only.

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I'm not surprised. There has been a lot of investing education going around with people like Graham Stephan, Meet Kevin etc. becoming popular and airlines are one of the easiest and first things anyone with a "buy when blood is on the street" mindset will be looking.

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Agree with the assessment. Only issue I have is retail is buying them hand over fist when no big investors such as Warren Buffet is selling. I believe bottom line is there will be more down side for the airlines before we see sustainable gains. I can be wrong, but rarely is the majority, retail investing, is right while rich investors are wrong. Especially when it comes to buying stocks.