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Imagine how selected, better-performing airlines would be doing if the price of oil was $40, instead of roughly $80, as it is now? They'd be soaring, pun intended. AMR Corp. (AMR), parent of American Airlines, first discussed here on June 22, 2009 at a price of $4.28, is poised to take advantage of a scaled-down U.S. airline sector.
Note of caution: American Airlines is a high-risk stock, not suitable for moderate-risk/low-risk investors. Don't buy AMR if you can't tolerate losing 50% of your position's value: it could happen.
Look for American's revenue to jump 8% in 2010, largely on higher average fares, which should offset a lower load factor. Any above-expectations growth in business travel will provide an additional tailwind, which airlines love. (Except, of course, when their planes are taking off or landing.)
Longer-term, assuming that the U.S./global economic expansions progress, AMR is well-positioned to benefit from the eventual resumption of travel growth: AMR has key hubs in Dallas/Ft. Worth, Chicago, Miami, St. Louis, and San Juan, Puerto Rico. Hence, it's in an advantageous position in a key domestic growth zone (Dallas) and internationally (Latin America). Further, given that emerging markets will be a key growth area, from middle class and disposable income expansion standpoints, the scale is tipped in favor of AMR.
American's aging fleet of planes and underfunded pension plans are hurdles, to be sure, but they're not enough to blot-out the positive story. The First Call FY2010/FY2011 EPS estimates for AMR are a loss of 9 cents to a profit of 79 cents.
Technically, AMR Corp.'s stock chart is in an uptrend, but it's permeated with high volatility, hence the stock's high-risk designation. Currently trading around $10, on any given month the stock can fall to $5, then reverse back up to $7. Without question, the stock is not for the squeamish, but the calculation is that American will be standing -- and prospering -- as the U.S economic expansion gains steam.
2010 Outlook: I view AMR Corp. as a long-term play, but if investors are looking to sell AMR within the year, it's probably best to take your profits after it rises to $13-14, if it fails to rise above $15.
Stock Analysis: I consider AMR Corp. to be a high-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 50% position in AMR now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my AMR position before April 2010 and I'd put a sell/stop loss at: $1.50.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Longer-term, assuming that the U.S./global economic expansions progress, AMR is well-positioned to benefit from the eventual resumption of travel growth: AMR has key hubs in Dallas/Ft. Worth, Chicago, Miami, St. Louis, and San Juan, Puerto Rico. Hence, it's in an advantageous position in a key domestic growth zone (Dallas) and internationally (Latin America). Further, given that emerging markets will be a key growth area, from middle class and disposable income expansion standpoints, the scale is tipped in favor of AMR.
American's aging fleet of planes and underfunded pension plans are hurdles, to be sure, but they're not enough to blot-out the positive story. The First Call FY2010/FY2011 EPS estimates for AMR are a loss of 9 cents to a profit of 79 cents.
Technically, AMR Corp.'s stock chart is in an uptrend, but it's permeated with high volatility, hence the stock's high-risk designation. Currently trading around $10, on any given month the stock can fall to $5, then reverse back up to $7. Without question, the stock is not for the squeamish, but the calculation is that American will be standing -- and prospering -- as the U.S economic expansion gains steam.
2010 Outlook: I view AMR Corp. as a long-term play, but if investors are looking to sell AMR within the year, it's probably best to take your profits after it rises to $13-14, if it fails to rise above $15.
Stock Analysis: I consider AMR Corp. to be a high-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 50% position in AMR now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my AMR position before April 2010 and I'd put a sell/stop loss at: $1.50.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
4-17-2010 @ 5:15PM
stpls506 said...
watch out for feable minded people that babble things like:
"it's probably best to take your profits after it rises to $13-14, if it fails to rise above $15."
if you sell at 13 how do you know if it's going to fail to go to 15 pinbrain?