What I am about to say is not a shock to anyone. And that is to say that airlines have been devastated by the global rise of the Coronavirus. As such many have seen shares dive 60-80% from in the past month.
Is now the time to buy the dip in airlines like DAL, UAL and LUV?
Many investors think so today as this group is leading the market higher. Helping their cause is the strong belief that the Government stimulus package will help the industry given how integral it is to the economy.
I’ll be honest. I am not sure if today marks the true resurrection of the group. Or if we need to find lower lows before a lasting bounce occurs. But what I do know, is that when the next bull market emerges, that all investors should overweight these airline stocks given the supreme likelihood of an oversized bounce from bottom.
So read up on the merits of each of these leading airlines below so you can have them on your radar screen for the right time to buy for the long flight back to higher prices.
Delta Air Lines (DAL)
DAL enjoys the distinction of being the largest passenger airline in the world. DAL shareholders have certainly enjoyed the fruits of the labor with shares on a steady ascent over the last several years. Plus the company pays a robust dividend that has actually quadrupled since 2014.
In fact, I have been in and out of DAL shares over the years in the Reitmeister Total Return portfolio as I think it’s the class of the industry. Meaning that as Peter Lynch and Cramer recommend, if you go for a group, then you should go for the industry leader. And when it comes to the airlines, that is Delta.
DAL is rebounding big time this morning as I write this article. But again, it is a loooonnnnggg way off the 52 week high of $63.44. It may take 2-3 years to get back there again. But if you are ever going to grab for t1 sure fire stock I the group, then DAL is the obviously So Share prices have enjoyed modest growth of 3.7 percent but with shares trading under $30 it sure is tempting to tuck some away in your portfolio for when that day arrives.
United Airlines (UAL)
While the travel industry may be one of the hardest hit during the COVID-19 crisis, UAL will likely weather the storm. Between the government stimulus package and people being confined to home, there will likely be a rush to travel once it is safe to resume. While UAL had previously suspended 95 percent of flights during this crisis, they recently announced the resumption of about five percent of those flights beginning in April which may mean they will rebound faster than other airline stocks.
UAL actually provided one of the more consistent year over year earnings results for the industry before this Coronavirus mess began. So it is reasonable to assume they will get back to their good ways when the industry is ready to take flight again which will help UAL shares fly above most other stocks.
Southwest Air Lines (LUV)
This might be a case of saving the best for last as LUV is considered the best in class and one of the few airlines with high marks for customer satisfaction. And from the operational side, LUV has shown ample earnings growth over the years.
While the company has limited international flight offerings, they are very active in the United States. The last five years, LUV has enjoyed 18 percent growth in revenue, net income of $3.2 billion and shareholders have seen their shares triple in value.
LUV shareholders have also enjoyed this consistent growth with dividends tripling to slightly more than 60 cents last year and shares prices increasing more than 10 percent. Once this crisis has passed, LUV will have to take time to get back on their feet but, their history shows their resilience should pay off for shareholders.
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DAL shares were trading at $26.50 per share on Tuesday afternoon, up $4.28 (+19.26%). Year-to-date, DAL has declined -54.37%, versus a -25.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
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