Delta Air Lines Inc (DAL)

(A Top Pick July 18/17 - Up 8%) Oil prices seemed to have stabilized, they are charging 30 dollars now for a checked baggage. They are returning capital. The risk is if the economy falls down. He sees a lot of upside still based on valuations.

Is this time different for airlines? They've consolidated and they say they won't fight each other about capacity this time. Delta and the others look pretty good now. But rising oil prices forced Delta to issue guidance to limit expectations. This is trading at 8.5x earnings. He thinks this time is indeed different for the airlines. Delta generates a lot of money from its credit cards (air miles). Good dividend and they're buying back stock.

It's as good as any airline. Good 11% return on invested capital. Now's a good time to buy airlines, despite abysmal longer-time history.

Doesn't own any airlines right now. Had looked at Air Canada (AC-T) which had an incredible year last year. You could come up with a million and one issues of why you would never want to own an airline, but at the same time you could make an argument that you are in the sweet spot of a cycle for the airlines.

The stock took a hit. She likes it because she is seeing better cash flow than their peers. They really have some exceptional free cash flow yields. They are able to increase their margins. (Analysts’ target: $63.00).

Transportation stocks have had a kind of bumpy last few months, and have pulled back down, so are more attractive on a valuation perspective. He generally likes airlines. The business has been rationalized as they have "whittled down" to a large handful of players. They seem to be competing less on price, therefore respecting one another’s margins. Labour, etc. seems to have been put in the background. With global economy improving, they are able to keep prices high. This has a PE of less than 10.

The US airlines have fundamentally transformed themselves. They used to be carefree and footloose with funds. Over the last 4 years they have consolidated, and there are now only 4 major carriers, and have been enormously profitable. This is buying back stock hand over fist. Raised its dividend, and announced a 50% dividend increase for the next quarter. Trading at about 9X earnings. Dividend yield of 1.5%. (Analysts’ price target is $66.)

Chart shows this is retesting old highs, and that is always bullish.

It is another one she likes. They have not been able to add margins, but they were able to add flights so they have one of the better valuations. See Top Picks today.

Doesn’t own any airline stocks. Typically, when airlines start to make enough money, they get into labour issues and have to increase capacity to deal with that. They’ve had a wonderful run and are wonderful trading vehicles, but there’s too much volatility for him.

Boeing (BA-N) or Delta (DAL-N)? This just rebounded off a beautiful price low at 2X Book. The stock is cheap. Its FMV is 85% higher than the current price. He would buy this and forget Boeing.

(A Top Pick Dec 16/15. Down 5.42%.) A superior operator in terms of an airline, and it has bounced all over the map. Reduced some of his exposure, but of the legacy carriers, this is best of breed. Really good cost control. Higher margins than others. Thinks better times are ahead for the airline industry.