With a big disclaimer that I am not a financial analyst and am not offering any sort of investment advice to you, I am contemplating adding some Delta stock to my portfolio.
I’ve forayed into buying airline stock twice before. The first experiment, buying and later selling United Airlines stock just after the company emerged from bankruptcy protection, was a great success. I made a tidy sum buying low and selling high.
But I got burned big time with American Airlines. I bought low in 2011, thinking the stock would rebound as the economy improved. Instead, American Airlines declared bankruptcy and the stock dropped to near zero. I foolishly dumped everything at about 20 cents per share. Unlike most companies which emerge from bankruptcy protection, American never cancelled its common stock. Had I held on and not sold I would have made an even more tremendous return than on United.
And now I turn to Delta, an airline stock that seems undervalued to me. Delta is trading at just under $58/share. The stock is up over 12% the last month due to very strong first quarter earnings and CEO Ed Bastian expects the growth to continue:
With the momentum in our business and our American Express contract renewal, we have increased confidence in achieving our full-year plan of top-line growth, margin expansion and double-digit earnings growth.
Delta’s P/E ratio is about 9.5 (Forward P/E is 8.0), which represents the stock may be undervalued. I also like that Delta offers shareholders a dividend.
I’ve also been covering Delta for years. I see how well the airline does. It makes its customers happy, delivers consistent on-time performance, and offers a generally competitive product domestically and internationally. As oil prices have remained fairly steady this year, I don’t see that trend changing.
CONCLUSION
My interest in Delta is more than a gut feeling that the airline will continue to grow and out-perform. But that emotional attachment to airlines always worries me. Part of me just wants to leave all my investments to people who study these sorts of things all day. And yet Delta seems like a good deal now.
Any thoughts on my potential acquisition of DAL stock?
The only individual stock I’ve purchased so far was Whole Foods (which turned out pretty well with the Amazon acquisition). But I recently bought Boeing (BA) on the day the Ethiopian Airlines report came out, just under $370. I’m guessing there will be a lot of pent up fear released once the 737MAX returns to service…but again just a small game to play with a small portion of my overall portfolio.
What a great day for me to post this as Barclays downgrades BA and it drops to $356. Me is smart! 😀
In any case I will hold out for the long haul, Boeing isn’t going anywhere…
I wouldn’t buy Delta stock today, or any stock for that matter, as the market crash progresses towards market close …
DAL stock is the best of the breed right now among US based airlines as far as the stock is concerned(Buffet bought 10%).
However, SAVE (with their all airbus fleet) is also right there & despite personal distaste for Spirit airlines, SAVE stock has more room to run.
Some thoughts:
Of all the US3, Delta is best positioned at the moment thanks to its lack of 73Ms. So far they haven’t seemed to have added extra capacity to pick up the slack on those routes that had been until now served by AA/UA 73Ms, which speaks volumes to their discipline. But this is a temporary state of affairs: presumably at some point the Boeings will fly again, and UA/AA/WN will need to recoup the lost costs due to the grounding. Will they slash fares in order to fill the planes as quickly as possible and as a method of convincing a skeptical, wary consumer? If they do, that will Delta continue to be as disciplined, or will it be a return to the bad old days of fare wars? Personally, I would stay away from airlines in general right now unless you only plan to hold DAL for 2/3 months
A trade, not an investment.
“The best way to end up with a small fortune in any aviation business is to start out with a large fortune.”
This has always been true and it still is. Good luck, and call me when the recession hits.
yet, DAL still trails the S&P 500 for the year…you need to look far beyond P/E ratios for the airline industry.
Passenger Revenue per Available Seat Mile
Cost per available seat mile
Available Seat Mile
Revenue passenger miles
Routes
Fuel Costs
Aircraft Purchase commitments
etc.
All of it very positive.
The market is volatile due to trade tariffs with China. I would sit on the sideline until that gets resolved or focus on other stocks that have dipped the last few days and purchase some shares of those because once the fear goes away the stocks will go back up.
The old adage that boat owners know well: “ A boat will give you 2 days of pleasure: the day you buy it and the day you sell it” Same applies to airline stocks ( or airlines for the ultra rich).While you might be lucky and get a bounce, it’s extremely unlikely that airlines are going to become mega profitable. After all, it’s well-known that the flying side of the business is very marginal and that most profits are derived from frequent flyer programs and credit card partnerships. Is flying going to be more profitable in the future, defying the experience of the past few decades? Unlikely.
You follow airlines closely enough to know when one is seeing some under the radar share shifts. Like Delta in 2012-13.
That’s where the real trades are in this space for someone like you.
I don’t get the sense they are taking share the way they were back then.