When to Buy Airline Stocks
After a literal plane crash, or in this case, several crashes. Every single airline stock predictably takes a hit for a few days after the news gets out, but they just as predictably rise back up after a few months of business as usual. This is a unique situation
Let’s look at a top airline stock and see what happened after the crash in upstate New York on Feb. 13th.
Southwest (LUV): Opened $7.07.
By Feb. 25th, it opened at $6.55. Not a huge drop, but big enough to begin buying again if you wanted exposure to the industry. And yes, it seems every stock is falling at the moment, but Southwest was holding fairly steady during this mess, looking ready to begin a climb back up until this crash happened. Notice on the chart the time between Feb. 6th and Feb 13th.
If I had cash on hand right now, I would probably invest in Southwest right now. They are a consistant performer, with management that cares about and takes care of both it’s employees and customers. They’ve never had a major incident, and their financials look solid.
Coincidentally, Southwest would be the only airline stock I would buy in any circumstances. Period. That’s mainly from personal preference colored by horrific experiences I and my friends have had on other airlines.
More Crosstex (XTXI)
You might think I’m crazy, but I spent most of the cash I had on hand in my Etrade account on more stocks of XTXI.
Stock Buy: XTXI (100 @ $2.42)
My average price I bought shares of Crosstex Energy for is now $2.81 as opposed to $3.07. Being a commodit stock, I think it will skyrocket in the coming month or so. Even this morning, as the Dow goes down further, this stock and several others I own are on the rise.
Plus, they annouce earnings on March 2, which I think will have a positive impact on stock price.
Portfolio Update
You’ll be hard pressed to find any stock that wasn’t hit hard this past 2 weeks. Uneasiness over Obama’s “stimulus”, and lots of talk about nationalizing banks (never thought this horror would happen in America), the markets reacted accordingly.
Remeber though, that you actually haven’t lost anything unless you sell stocks at the lower price. And there is no way I’m selling my stocks, especially since I have stuck mostly to solid companies that have the resources to weather the storm.
Here’s my update so far:
- Initial Investment: $3,500
- Current Worth: $2,757.22
- Amount in Cash: $297.02
Obviously this sucks, but again, I actually haven’t lost anything yet unless I sell.
Current Locked in Gains: $175
So technically, I’m up $175 when all is said and done.
Current Prices of Holdings:
| DAC | 4.22 |
| EJ | 6.3 |
| FEED | 1.12 |
| IO | 1.19 |
| ITRN | 7.42 |
| KOOL | 0.55 |
| OPMR | 0.58 |
| PZG | 0.6 |
| SYMX | 0.43 |
| XTXI | 2.36 |
I know. Ugly. But I’m not going to fall into the panic trap. I know eventually things will go back up. Things are about where they were when the crash in November happened, and they came back up steadily for more than two months straight. I expect a similar things to happen.
In fact, in these circumstances, I might decide to make another deposit and up my total investment, since things are even cheaper than they were when I first started buying on Dec. 31st.
Keep Buying if You Believe in the Company
Even if their stock keeps plummeting?
Especially if their stock keeps going down.
Of course you don’t want to do this if the company is truly worth what the market is pricing it at, or maybe even worth less than that (GM, I’m looking at you.) But if they company is solid, has good cash flow and management, with consistent earnings outlook, then cheaper prices mean better bargains for you.
Whatever you do, don’t sell and lock in your losses. Be patient.
Stock Buys:
- DAC (100 @ $5.6649)
- IO ( 100 @ $1.6283)
I purchased these stocks with the influx of cash I had from the FCX sale.
Buying at these now lower prices means the total average price I paid for each share goes down, in a sense lowering my total losses so far, and giving me a much better upside when the stock prices go back up.
Original price paid for DAC: $6.81.
Now I’ve bought 100 more shares at a cheaper price, so now the price I paid for my 180 total shares of DAC is just $6.17.
Before, the price would have to go to $6.82 or above for me to see gains. Now it just needs to go to $6.18 or above.
Similarly for IO. Original price paid: $2.94
Now, with the 20 shares I bought earlier, plus the 100 I bought more recently, the average price I paid per share is now just $2.37.
So for good companies that you know are solid, just look at stock drops as opportunties to grab an even better bargain. When the market begins to put an accurate value back on the company, you’ll reap that much more profit.
And Now I Learn From My Past Mistake
As I mentioned in my lament about not selling XTXI when I had the chance, don’t be so gung-ho about your investment strategy for a certain stock that you miss out on opportunities. So I put that lesson to work when dealing with FCX.
I bought 30 shares of FCX at $23.92, a gold and copper mining company, as my exposure to gold as a hedge against uncertainty and inflation. It was meant as a longer hold, as I expect gold to skyrocket in price, carrying these shares with it.
But what had I learned last month?
When the price soard past $29.00 per share, I put a trailing stop of $0.90 on it on February 8th. Now, if the price dropped $0.90 from it’s high, it would automatically sell. On February 9th, it reached a high of $31.25, then plummeted back down to $27.29 today.
What did I sell my 30 shares at? $30.42.
Net Gain: $175.00
Now I’ll watch closely to see if I want to get back in at a lower price. Or maybe look for another gold mining stock to invest in.