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Kenneth Fisher Bullish on Emerging Market Airlines: LFL, CEA, TAM, GOL

December 22, 2010 | About:
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guruek

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With Election over and holiday seasons around the corner, money manager Kenneth Fisher is rather jolly these days.

Out of his optimistic nature and following his bullish tradition, Fisher wrote a column for Forbes, entitled “Gridlock Is Good for Stocks”. The gridlock created by the mid-term election just gave him more reason to be bullish:
We haven't had a negative stock market return in either the 6 or 12 months following a midterm election since World War II.

It's typically a time when the volume of political noise gets ratcheted down from the blaring levels of the midterm election year. Look forward to the gridlock of the coming year, because little gets accomplished. If you hate politicians as much as I do you'll find this quiet marvelous. Markets do!


Fisher recommended a number of stocks in the article. One sector stands is airline companies in the emerging markets:
I've long loved emerging markets airlines because they usually sell at bargain prices. The troubled history of developed market airlines unfairly taints these stocks. In the emerging world they're growth stocks.

In the Jan. 18 issue of FORBES I recommended Chile's leading airline, LAN (LFL), at $16 and China Eastern Airlines (CEA) at $18 adjusted for a 2:1 split. On Nov. 2, 2009 I recommended TAM (TAM), Brazil's leader, at $13. Both TAM and LAN are holds in my book.

CEA is still worthy of purchase at current prices. It is aggressive, gaining market share, well managed and growing nicely, yet sells at ten times my estimate of 2011 earnings and one times trailing revenue.

New money buyers should focus on Brazil's second-biggest airline, Gol Intelligent Airlines (GOL). While TAM is Brazil's established high-quality airline with premium pricing, Gol is the new low-cost up-and-comer. Gol now controls 40% of Brazil's seating capacity with over 800 daily flights to more than 61 South American destinations. It's much cheaper than TAM at six times my estimate of 2011 earnings, 1.5 times book value and 80% of annual revenue.


Read the full text of the article: “Gridlock Is Good for Stocks.


Rating: 1.7/5 (6 votes)

Comments

cm1750
Cm1750 premium member - 3 years ago
Fisher says gridlock is good for stocks.

Normally this is true. However, the economy may need more fiscal stimulus. Given the republicans unwillingness to authorize more stimulus, that might be a bad thing. States could also be in big trouble as they met their budgets this year via Fed stimulus.

Bernanke could stimulate through monetary policy to make up for this.

I find it best to ignore Fisher - he is a permabull and financial charlatan with a mediocre record. His Fisher Investments reminds me of hard-sell boiler rooms.

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