I should have more aggressively sold shares/calls before 4q report..bird in hand worth two in bush...between aal's report and baba's got spanked hard. Took most of my hedges off baba two days before report..big booboo.
Finished buying all the shares I sold at 51.75 back at 46.50 yesterday. Was hoping for under 46$ but dangerous splitting hairs. Did that with selling calls when was at 52$ couple weeks ago and missed out on great short term trade.Still concerned that could have market correction but if oil continues to drop airlines may hold up well vs. market.
Agree, as I mentioned we need additional catalyst(s)..greater merger synergies or as you mentioned an oil selloff which imo is likely .
Looks like oil rally over, airlines should start to recover today but not clear to me how much without some other positive catalyst.
If have even small revenue growth I think we will be fine. assuming fuel costs are near their estimate. Multiple expansion looks like it will be delayed until 2016..
Market wants to see that revenues will grow and/or merger synergies will be greater than expected so not all about oil. Oil is likely being discounted to rise in 3-4q , market needs to see other positives before than.
First up, American Airlines, which reported disappointing revenue metrics this morning. Cowen’s Helane Becker and team take a look at the numbers–and come away feeling bullish:
American reported January traffic and updated 1Q15 guidance. Management reiterated the PRASM range of down 2%-4%, but lowered pre-tax margins to 12%-14% from 13%-15%, as a result of higher jet fuel costs. The shares have been weak this year due to volatile jet fuel prices. We believe the current guidance was anticipated given the shares’ YTD underperformance…
We continue to believe there are several catalysts that will move the shares higher in 2015. American will continue to work towards gaining their single operating certificate in mid-2015, which will enable the company to merge its operations with US Airways and rationalize capacity throughout the system. American is a ~$35 Bn market-cap company, making it one of the largest companies not included in the S&P500. American has hit all the criteria to be added and we believe it is a good candidate to join the S&P500 when a spot opens. Investor sentiment has been somewhat mixed, however the two catalysts above will be difficult for the market to ignore.
I was surprised at 4q ccall they guided 2015 fuel costs so low, still feel oil setting up for big drop back to $40-45. Oil has been trading up based on future expectations not current stockpiles which are at all time highs. Added shares today.
Uncle your straining my brain again, lets keep it simple as I have said before the producers may be cutting back rigs but they have to keep up current production to generate sufficient revenue so imo we will see oil prices drop again. Saudis/Opec clearly playing hardball to put the hurt on their enemies and shale despite their denials.
You are a wealth of valuable info uncle...almost too much for me to process...agree per traders overreacting will be interesting to see what happens if oil tanks to 40$ which imo it likely will. Short of Saudi's cutting output or complete shut down in Libya no way oil keeps going up imo no matter how many rigs are dropped.Fact is Production Output has not dropped and likely will not drop for several months. Talking basic supply/demand, econ 101...
Agree overall but airlines are unfortunately particularly susceptible to terrorism/geopolitical adverse events that can shatter solid fundamentals....
". I will buy more shares regardless if aal is in the 45-47$ range". With one caveat, I really do feel there is a significant chance of a significant correction at any time in which case aal could drop below 45$ . Would be a screaming buy but as we all know when the market gets ugly the baby gets thrown out with the bathwater. I really wanted to sell more calls to hedge pps/sold puts when pps was around 52$ but my order did not fill. Have no downside hedge other than the 57.50 calls I sold before 4q report and they have 90% gains, little upside.
Actually my biggest concern per aal is not really the fundamentals as much as it is geopolitical risks/general market selloff. I am still very concerned about the possibility of no Iran nuclear deal which could lead to Israel/US strike on Iran which imo would result in a one day 10% drop in the market and hit airlines very hard.. A major terrorist attack on the Us would have a similar impact. Heck, look at what the Ebola panic did to the market/airlines.JMO
Bears, barring further Libyan issues which imo is the reason oil was up today, or other geopolitical issues, imo wti oil will likely drop to as low as 40$ maybe less due to a huge oversupply over the next couple months. If that occurs the big question will be whether the market will selloff with oil as has been the trend and if aal drops with the market. I will buy more shares regardless if aal is in the 45-47$ range.
Yeah, Gartman and the other yappers on Fast Money say a lot of interesting things that are rarely correct...