Air Canada (AC.TO)

Stock had some real difficulties. Came out with fourth-quarter earnings that were not great. Has been hurt by a drop in the Cdn$. They insist they are going to cut costs by 15% in light of the currency headwinds. Expect there will be a better stock return in the 2^nd half of this year.

(Market Call Minute.) Likes the airlines, but he would prefer to own a US airline. There is a little bit of slowness in the Canadian economy. He owns the bonds.

Price of fuel went up and dollar went down and it got smashed. Airlines are difficult.

Great run up, current pullback is not unexpected. Overall picture is ok, but too volatile for his taste. If stock breaks below 200 day average, then watch it. (200 day average is $4.91).

(Top Pick Oct 16’13, Up 27.86%) Exited because the accelerated earnings growth was deteriorating.

Does not like airlines. There were some strong headwinds and one was the Canadian Dollar. It’s done well but he is not sure it will do well now. He has never owned an airline.

Very cautious about the business. So many airlines have gone under. A very tricky industry, volatile. It has peaked so he would be cautious of catching a falling knife. A risky industry.

This is a changed company and it is very hard to throw all of your money towards a stock like this, but it is worth a little bit of your attention. Thinks a lot of the Cdn/US dollars are built into the share price at this point so he is not running out to buy at this time. Incredibly cheap for the cost reduction that they have in place. Their pension is getting back in order and their balance sheet is looking a little bit better. Have a good growth plan. This is not a stock you want to hold long-term.

He is a long-term investor and airlines are almost always trades. No industry in the world has ever lost more capital than the airlines industry. It has just gone through a good run and maybe it is time to say goodbye. The fall in the Cdn$ is going to make travel outside of Canada more expensive and they will start losing customers and will have to start raising fares.

A nice chart up to a point. A long term upward trend was broken. It is potentially developing a head and should pattern but if it breaks that pattern, then you may not want to be in it. Could drop to $7. The downside risk is the point range. The lower CAD$ increases their price of oil and they have said it is impacting their margins.

(Market Call Minute) Tail winds have been behind them for the last little while but he would not add to a position.

Air Canada (AC.B-T) or WestJet (WJA-T)? This one is a big holding for him which he got at around $2. You have to remember that the airline model is a highly leveraged model. Very high fixed costs. As revenues go up or expenses are cut, it can create a huge change in your earnings. This company has benefited from both. Has a rise in revenues and seat utilization is at record levels. Air Canada has been replacing planes and is becoming more efficient and has been very good at cutting costs at the same time. Also, there was a big concern about their pension liability, which has been put behind them. They now have a surplus.

Missed this one entirely, partially because of his long-term experience with airlines. Right now this seems to have some pretty good momentum. Fuel costs, which are a significant amount of the base cost of flying, seem to be under control. With the economic growth we are experiencing, people are more inclined to travel. Thinks this will do okay over the next little while. If the stock starts to go sideways, he would be inclined to sell half, take some profits, and see where you go from there.

(Market Call Minute.) Had a great run and if you own take the money and run because airlines stocks are notoriously cyclical.

The number of airlines is decreasing in North America. So eventually, somebody has to be #1, and that is part of the bullish story. This is pretty fully valued. Have a lot of leverage to the Cdn$ and are purchasing crude oil in US$s. Its biggest input costs are labour. The big drop in the Cdn$ is a huge boost for the profitability of oil/gas companies in Canada, so if you own this, as a hedge, you might want to buy an oil company as well.