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Why Hawaiian Holdings (HA) Will Emerge Stronger From the COVID-19 Crisis

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Alex Smith
·4 min read
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Third Avenue Management recently released its Q1 2020 Investor Letter, a copy of which you can download here. The Third Avenue Value Fund posted a return of -42.08% for the quarter, underperforming its benchmark, the MSCI World Index which returned -20.95% in the same quarter. You should check out Third Avenue Management's top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Third Avenue Management highlighted a few stocks and Hawaiian Holdings Inc (NASDAQ:HA) is one of them. Hawaiian Holdings engages in the provision of air transportation services. Year-to-date, Hawaiian Holdings Inc (NASDAQ:HA) stock lost 40.9% and on June 15th it had a closing price of $16.59. Here is what Third Avenue Management said:

"Hawaiian operates Hawaiian Airlines and does so very competently. During the last five years, Hawaiian has produced earnings of $4.53 per share, on average. Over the last twelve months that figure was $4.71 per share. Today the stock price is $10.38, meaning 2.2x trailing earnings. One could think of this multiple as suggesting a 60% chance that the stock will be worthless and 40% chance that the company will recover, produce average earnings in the medium-term and be valued at only 8x earnings. To be clear, our view is that the highest probability scenario is that the company will not only recover, but will grow its earnings into the future, and that the earnings stream is worth more than a multiple of 8x. The company is well-capitalized and owns (rather than leases) a large majority of its aircraft, which has several implications. First, the capital structure and relative absence of fixed lease payments offers substantial runway to navigate this unprecedented shutdown. It is estimated that Hawaiian has enough liquidity to sustain a complete shutdown of all flying for approximately 10 months (without government support, which appears to be available if needed). Second, the company has a highly desirable and saleable aircraft fleet, which could be sold or otherwise used to obtain more financing, in the event that proved necessary. And yet, today the company is currently trading at less than half of tangible book value, while book value may be a decent approximation of the liquidation value of the business. We would note that it took U.S. domestic air travel a matter of only 24 months to fully recover following the September 11th, 2001 terror attacks, an event that unleashed extraordinary fear of air travel specifically. We would also note that as of late March, Chinese domestic air travel had already begun a meaningful recovery."

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Our calculations showed that Hawaiian Holdings Inc (NASDAQ:HA) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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Disclosure: None. This article is originally published at Insider Monkey.