Tags: Sanchez | airline | stocks | industry

Airline Stocks Are Finally Having Their Day in the Sun

By    |   Thursday, 10 Apr 2014 09:45 AM

The one sector that many investors love to hate the most may be the place to be in 2014, according to Gina Sanchez, founder of asset manager Chantico Global.

Her unloved gem in the rough? Airline stocks.

Sanchez said there is a range of factors in play as to why airlines are finally getting their due.

Editor's Note:
New Warning — Stocks on Verge of Major Collapse


"I just want to point out that this was the one industry that for 50 years since its privatization had never made a dollar. And finally they are," she told CNBC and Yahoo's Talking Numbers.

For starters, airline's fuel costs — their biggest expense — have been decreasing and she expects them to keep falling.

Second, she is expecting more consolidation in an environment that is conducive to mergers and acquisitions. "That could very supportive to stock prices," she noted.

Finally, Sanchez expects favorable balance sheet strength and healthy margins going forward in airline stocks, a recipe for higher valuations.

CNBC pointed out the current year-to-date returns among major airline stocks are positive. For example, Delta is up 21 percent, American is up 41 percent, Southwest is up 24 percent, Alaska Air is up 23 percent and Spirit is up 23 percent.

Sanchez does not believe all airline stocks are created equal, however. She is not as enthusiastic about those with smaller capitalizations, which include JetBlue, Spirit and Alaska Air, for the best share price potential at the moment.

Richard Ross of New York brokerage firm Auerbach Grayson told Talking Numbers he is much more cautious on airline stocks.

"The move is most of the way over," he predicted. "Chasing a group as notorious as the airlines at the tail end of a multi-year, triple-digit move is not exactly a strong play in my opinion."

Airlines are certainly doing something right these days, according to their customers. The latest Airline Quality Index, which measures passenger satisfaction, just received its highest rating in the 23-year history of the index, The Dallas Morning News reported.

That came despite the new tendency by airlines to raise requirements for free frequent-flier tickets, as well as airlines' recent trends to add extra fees for bags and more foot room, according to USA Today.

Editor's Note: New Warning — Stocks on Verge of Major Collapse

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The one sector that many investors love to hate the most may be the place to be in 2014, according to Gina Sanchez, founder of asset manager Chantico Global. Her unloved gem in the rough? Airline stocks.
Sanchez, airline, stocks, industry
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2014-45-10
Thursday, 10 Apr 2014 09:45 AM
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