Are Airline Stocks Worth Buying?
Two traders grappled with the issue on Tuesday as the group raised concerns about fuel shortages due to the cyberattack on a major U.S. pipeline this weekend.
The US Global Jets ETF (JETS), a basket of 39 airline stocks, closed trading more than 1.5% on Tuesday. It’s down about 8% from the most recent highs in March.
“Not all airlines are created equal,” said Nancy Tengler, chief investment officer at Laffer Tengler Investments.
“Southwest is in a unique position to get out of this strengthening,” she told CNBC’s “Trading Nation” on Tuesday, referring to the company’s “strong history of hedging oil prices.”
Southwest has hedges that will become profitable when crude oil prices hit $ 65 and $ 70-80 a barrel. Another “really aggressive protection program” will begin in 2022, Tengler said. Crude oil prices rose to just over $ 65 a barrel on Tuesday.
Southwest also announced that it would be hiring new flight attendants for the first time before the Covid pandemic kept the economy in suspense due to strong demand.
“Once the pipeline is back on track this is one company you want to take advantage of its weakness as it will be a strong player in the medium and long term,” said Tengler. “Mostly vacation trips. We don’t have to wait for business trips to come back. We own and would be buyers here.”
Southwest found another fan in Bill Baruch, founder and president of Blue Line Capital and Blue Line Futures.
“I’m very optimistic about crude. I think crude can hit $ 100 in the next 18 months, and I think that will be a headwind for airlines. The Southwest is doing very well and given that.” very well positioned. ” Hedges, “said Baruch in the same interview.
Having recently crossed a major trend line, the stock would be a buy on a pullback to around $ 54 per share, Baruch said, citing a chart.
Southwest shares were down over 2.5% at $ 59.78 on Tuesday.
Baruch’s other choice was the low-cost airline Spirit Airlines.
“I own Spirit Airlines and I like Spirit Airlines,” he said, adding that he was “very reluctant” to invest in airlines other than Spirit and Southwest.
With travel picking up speed again, consumers will likely be ready to go on vacation in the coming months, Baruch said.
“I think Spirit Airlines will be well positioned to capitalize [on] that, “he said.” On a technical basis, I think you saw a good rally out of the hole here in Spirit. “
“The $ 36 area has been very sticky and while there is a lot of resistance there, it holds that resistance and almost builds a flag-like pattern that I find very bullish,” said Baruch.
Spirit Airlines shares closed nearly 3% on Tuesday at $ 33.48.
Disclosure: Tengler and Laffer Tengler Investments own shares in Southwest Airlines. Baruch owns shares in Spirit Airlines.
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