The airline industry, one of the largest components of the travel industry, develops transportation services to customers. Firms in this industry can either be airline transportation firms like American Airlines Inc. (AAL, Financial) or aircraft manufacturing firms like Boeing Co. (BA). The majority of airline companies have positive financial outlooks, providing profitable opportunities for investors. As the stock price and common valuation ratios reach one-year lows, many gurus are increasing their positions in these stocks.
One of the largest airline transportation companies, American Airlines currently has stock prices near the 52-week low and thus 21 gurus own the stock. Although American’s P/E and P/S ratios are high compared to other stocks in the airline industry, these valuation ratios are at 2-year and 3-year lows, respectively. Additionally, the ROE of American Airlines is higher than 99% global airlines companies. The positive financial outlook of American is a likely reason why gurus are buying the stock. During the first quarter of 2016, Jim Simons of Renaissance Technologies LLC bought 298,532 shares of American Airlines.
The CEO of United Continental Holdings Inc. (UAL, Financial), Oscar Munoz, bought 19,800 shares April 22 at an average price of $50.53, a transaction that totaled slightly over $1 million. As his company had P/E and P/B ratios near 5-year lows, Munoz believed that his company’s stock is undervalued and has great growth potential. Furthermore, United has a financial strength rating of 7 out of 10, with a return on invested capital of 64.07%. United’s ROE, ROA and 3-year EBITDA growth are higher than 97%, 94% and 92%, respectively, than companies in the global airlines industry.
Low valuation ratios and high financial strength numbers are two top reasons why it is a great time to invest in the airline industry. However, other reasons for investing in the airline industry exist. Delta Air Lines Inc. (DAL, Financial) and Southwest Airlines Co (LUV, Financial) have a high Piotroski F score, indicating that the financial strength of these two airline companies have high financial strength, profitability and growth. As these companies show healthy financials, four gurus increased their positions in Southwest Airlines. One of them is T Rowe Price Equity Income Fund, who added 20.41% to its position in this stock.
Stocks in the aircraft manufacturing industry also have positive financial outlooks. For example, Boeing, with a return on invested capital of 91.33%, has a profitability and growth rating of 8 out of 10. Boeing’s ROE is higher than 98% of the firms in the global aerospace and defense industry, and the dividend yield of the firm is near a five-year high. Boeing’s dividend yield, which is higher than 78% of firms in the global aerospace and defense industry, is near a 5-year high. As the Seattle-based aircraft manufacturing company has healthy financials, Joel Greenblatt of Gothem Asset Management, LLC increased his position in the stock by 45.83%.
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