Hello Forum members, As many of you may have noticed, the price of oil has fallen dramatically due to uncut production. This has positively impacted airline stocks, like AAL (American Airlines), JetBlue Airways, Southwest Airlines, and United Continental. These stocks shot up 6-8%. Would these stocks be a good buy until the production of oil is cut? Thanks in advanced!
I don't think they will be a good buy because as soon as the price comes down do will their value, it's a good time to sell though.
I'm in Air Canada right now which has been doing fantastic. They say that for every $1 oil goes they save around $25 million over the course of a year. I can't say I know too much about the American variants, but the Canadian ones are doing rather well. Also, haven't verified it myself, but apparently Bank of America just listed Air Canada as a "buy" within the past 30 mins or so.
I have never owned an airline stock. Mainly because the competition is fierce, customers almost always want to go with the cheapest option, very little consumer loyalty and there are many outside factors (such as the price of oil) which affects them greatly. If you are looking to profit from the drop in the price of oil, then you are late to the party. As you said the stocks shot up already... Now if you think oil will be getting cheaper and cheaper in the future then you might still be able to profit from this.
I agree, this sort of moves are early anticipated, that's how fortunes or at least good money are made, reading the market and buying and selling in the right time.
I am not a fan of airline stocks. Aside from fuel concerns, there are too many other risks and concerns for me personally. I have been known to take short positions against them.
Airline stocks are extremely risky, and more goes into their swinging valuations than just fuel costs. These stocks are hard to judge and even harder to truly profit from with any consistency. I'd shy away from them in favor of more reliable and higher upside stocks, no matter what the oil costs are around the world right now.
They become the obvious trade in these situations, but the smart money gets in quickly and once the trade has played out a bit it will reverse. So play it as a momentum trade but be prepared to sell quickly once the story starts to change. This is a macro-driven event which might not be sustainable.
"I don't like airlines, lousy unions ..."—Gordon Gekkon, Wall Street. Sorry, couldn't help myself. In all seriousness, I'm sort of turned off by the volatility of airline stocks. Though, granted, I tend to be somewhat conservative in my primary investments. They may be the right move for some, but not for me.
A trend is a trend until it comes to an end. The problem is that we don't know when or if there will be a cut in production. Get it right and you're a genius, get it wrong and you're a fool.
