With surging crude oil prices, and a slower economy, airline stocks don't rank high on investor wish lists. You don't hear colleagues standing around the water cooler singing the praises of the airlines. So what would make a sane investor contemplate purchasing an airline stock? I am not sure myself but if you take a long look at JetBlue Airways Corporation (NASDAQ: JBLU), you may feel like throwing the dice.
Mark Kreiger at SeekingAlpha.com has a really good analysis of why JetBlue stock is compelling. He says, " The airlines are responding to the fuel crises by doing all the right things such as utilizing fuel hedging programs, initiating capacity reductions and reducing overall costs."
Kreiger singles out JetBlue because their Q1'08 report soundly beat analyst estimates. The company has $1 billion in cash and has a book value of $6. Well above the approximately $4.50 price per share. More interesting is a potential short squeeze setting up on the stock. Kreiger analyzes this further at the site, and it's worth a close read.
If you believe that at some point crude prices will drop, and you are looking for a way to play that drop, you potentially may want to do some research on JetBlue.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/27/08.
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Reader Comments (Page 1 of 1)
5-27-2008 @ 6:38PM
Steve said...
One might consider a rather obscure phenomenon. For the first time in history, it is cheaper to fly than drive anywhere more than 8 hours away. Fuel prices should be looked at relatively. My bet is that translates into higher than expected earnings as fuel prices climb.
5-28-2008 @ 7:50AM
Michael Schneider said...
Airline analyst Julius Maldutas was on CNBC yesterday and he noted all the airlines are in trouble but he thinks Jet Blue will be a survivor because Lufthansa bought a big piece of the stock there. I also read the Seeking Alpha item and agree JBLU looks interesting here. Fuel prices are still very high so a drop of a few dollars may not help the airlines business that much but some of the stocks can be a good hedge against any oil price decline since most people have oil stocks in their portfolios that they don't want to sell.