Westjet Airlines (WJA.TO)

It has had a very, very nice uptrend, as well as it has been moving very well above its own trend line, until it broke below the 40 week moving average. Now the stock is in the negative mode. Some support around $25. It could turn into a double bottom. However, at this stage there is a negative momentum. Be careful, not to let the stock go below $21 because then something else could be happening with the company.

Airlines are investments that you want to rent, but not own. This one has been very good for the initial owners, but is now much more like an airline stock, much more volatile. It has suffered probably the most amongst North American airlines, and he attributes a lot of that to the Alberta factor. Not the kind of airline that he would invest in now.

This has come under a lot of pressure. There has been talk of the pilots unionizing. Also, they recently cut their 2^nd quarter revenue forecasts. Analysts are now seeing that it has overshot on the downside and you need to pick it up. PE is less than 8 times. There should be further upside from here.

Feels there are probably a number of problems that revolve around the strength of the Western Canadian economy, and this airlines relies on that part of the market. Also, the stronger Air Canada (AC-T) gets, the more difficult they can be as a competitor. He would prefer Chorus Aviation (CHR.B-T).

WestJet (WJA-T) or Air Canada (AC-T)? She doesn’t own either, and typically does not invest in airlines because they are so cyclical. Lower crude prices should reduce their fuel costs, which they are not passing on to consumers. Feels this one is generally a better overall operator. They recently came out with a profit warning.

Transportation stocks, airlines in particular, tend to do well from October into November, peaking around the US Thanksgiving. This one has had a seasonal gain of about 15% over that time frame. It has a large uptick at the end of the year, which is what you want to take advantage of. Take advantage of the weakness more towards October, and if it continues to go lower, there should be some very appealing buying opportunities into the end of the year.

Airlines have benefited from the collapse of crude prices, but he thinks a lot of that is already baked into the stock. This company has some specific problems that have yet to be reflected in the share price. The 1^st one is Rouge, a discounted airline which has about a 22% overlap between the 2 on their routes, as well as being significantly cheaper. Also, there is a potential launch of another airline in Western Canada. He is Short this stock.

Doesn’t own airlines and probably never will. These are trades with probably 6 month outlooks. This company benefits as fuel prices go down and travel goes up. On the negative side, they have been adding capacity, which is something you never want to hear in the airline business. When capacity is tight, airlines print money. When they start adding capacity, not so much.

A lot of moving parts. Oil prices, Calgary and western economy are influencers. They have done a pretty good job. This would be the one he would gravitate toward if he looked at this sector. He has CNR-T.

Transportation sector tends to do well from about September all the way through to the end of October and into November. It tends to peak around the US Thanksgiving holiday. Then the following period of seasonal strength is from January all the way through to May. This stock did well for the 1^st period of seasonal strength, but didn’t do so well for the 2^nd period. There are quite a few concerns around the transportation area right now.

Short (and Long Allegiant Travel Company.) This airline, Air Canada (AC-T) and all airlines globally benefited from the huge drop in crude oil and jet fuel prices. A lot of the customer base for this airline is in Western Canada, so they are going to be impacted. Also, for the weaker Cdn$ it is going to be more expensive to travel abroad.

This is a good example of one of those stocks that, despite the stock market moving up or at least sideways, it is rounding over. It is just starting to play its $27 support level. It has been over a few times in the past year. If it broke down through that $27 level, he would exit. If it holds, it might be okay. Starting to look a little weak.

Thinks there is a structural change going on in the airline industry. They are finally in a position where they are cleaning up their balance sheets and starting to generate positive free cash flow. Much more disciplined with capacity. For this reason he prefers Air Canada (AC-T), but they are both well-run companies. This is exposed more towards Western Canada. With the slowdown in the oil patch, there is some concern about the Alberta economy.

His philosophy on airlines is “don’t invest”. He has seen too many airlines over the years go under for various reasons. It is in a good environment. The cost of fuel has gone down. Travel is definitely up. They should do quite well, but these stocks tend to be pretty darn volatile at times. It may be that an increase in the price of oil and jet fuel would be enough to knock these stocks right down again.

Thinks they missed their last couple of earnings reports, which is why the stock has fallen. It is below its 200 day moving average and the 50 day is now falling. This is usually not a very good sign. He would prefer Southwest Airlines (LUV-N).