Are Airlines Ready to Fly?

07/18/2003 12:00 am EST

Focus:

Jamie Dlugosch

Editor, The Rational Investor

"Given the decimation of the last two years, the airline industry represents one of the best values in the market today," says Jamie Dlugosch, editor of The Rational Investor, who picks three majors. Meanwhile, the top managers at Marketocracy are boosting their position in a small, regional carrier. 

"Prices of the major airline stocks are at their lowest levels in years--even after seeing a considerable rise over the last few months. Rising out of the ashes, the industry is poised to return to better times. Investors should use this opportunity to add one, two, or three airlines to their portfolios. As demand improves, the scale of the larger airlines puts them in a better position to drive profits to the bottom line. With lower variable costs, including the added benefit of lower fuel prices, the future is indeed bright. I already own American Airlines (AMR NYSE). Investors can also consider either or both Northwest Airlines (NWAC NASDAQ) and Delta Airlines (DAL NYSE). A large, short-term percentage gain in these three stocks should not be a deterrent. In the long run, today‚Äôs prices still represent a great buying opportunity into a vital industry. There may be continued bumps in the road, but the potential results will reward patient investors."

"The m100 represent the top performing managers among the 50,000+ virtual mutual funds that are managed by individuals on the Marketocracy Web site. Ken Kam issues occasional stock alerts when a stock is being accumulated in the m100 portfolios vs. sales being made by the lesser-performers. Among the latest Stock Alerts is Atlantic Coast Airlines (ACAI NASDAQ). "Atlantic Coast is a regional airline serving 84 destinations in 30 states in the eastern and midwestern US and Canada. It operates 142 aircraft under agreements as both a United Express and Delta Connection carrier. Our analysis shows that the best investors under our coverage increased their holdings in ACAI by 19%. The balance of portfolios (which underperformed the top 100), showed a decrease in their holdings of ACAI by 1%. We would also note that as its stock price continued to rise in June, the best investors were selling ACAI; but, when the price dropped 27% in July, the best jumped back in and boosted their holdings in ACAI to 27% of all holdings in the portfolio."

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