Airline Industry Stocks — A buying opportunity?

Posted June 21, 2008

Many airlines and related industry stocks are losing momentum as fuel prices accelerate. Should investors avoid this sector – or buy at bargain prices? Horacio Marquez of The Money Map Report tells Smart Trading viewers where to look for potential gains.

Baltimore — (TFN): The following is taken from this week’s Smart Trading video featuring Horacio Marquez.

Laura Cadden: Long thought to be a solid recession proof play, airline industry related stocks have been suffering of late largely due, of course, to fuel costs. As airlines chop services and downsize, should investors look elsewhere or view this as a buying opportunity?

I’ve invited Horacio Marquez of the Money Map VIP Trader to provide us insight.

So tell me Horacio, where do you see the airline sector heading in 2008?

Watch this Smart Trading video with guest editor, Horacio Marquez.

Horacio Marquez: Well, it all depends on oil and oil is a huge question over here. Some people believe it’s going to $150. Some others believe it’s going to $200. Some others believe it’s going to $85. My own belief is that we are in a bubble. Bubbles are incredibly difficult to predict. I think we should be consolidating down.

Having said that, from time to time as we see sell offs. I have seen for example today, a short squeeze.

So, when you’re trading airlines these days, you’re really trading oil. There is demand destruction already in oil at these prices. We’re also seeing a dollar rebound, which is good – it will motivate oil to keep falling from these levels.

And we’re seeing other measures, like the CFTC trying to see whether there is irrational or illegal speculation in the markets and trying to curb that speculation.

And measures from countries like India, Indonesia to do away with the subsidies to gasoline. Many countries around the world have tightened monetary policy in order to slow down their economies and reduce their consumption of oil.

All of that leads me to expect that oil will be selling off at some point in the future. When that happens, airlines will thrive.

Rather just watch the video? Click here.

Laura Cadden: Is there any airline right now that you think is going to weather the storm better than others?

Horacio Marquez: Yes — airlines that are heavily capitalized, like Southwest (LUV:NYSE), should be doing very, very well. Recently Southwest’s stock closed the 200 day moving average to the upside for the first time in a very long while so that is very encouraging.

Laura Cadden: Let’s talk about Boeing for a moment. It just announced it was pushing back delivery of six surveillance airplanes to Australia. Of course it’s new 787 “Dreamliner” is more than 16 months behind schedule. Is there trouble ahead for this manufacturer?

Horacio Marquez: That depends on how you see it. From a production standpoint, obviously Boeing has had some problems. However, all those problems are more than discounted in the stock at these levels — it’s incredibly cheap.

What many people in the market fail to see is that even with oil at very high prices, actually that is an enticement for airlines to switch even faster to the new Boeing “Dreamliner” because it is 20% more fuel efficient.

So you have an airplane that’s much more fuel efficient and that gives you a competitive advantage on any route that you’re running. And actually, that competitive advantage is incredible because as we speak, jet fuel has become the largest cost for any airline surpassing that of salaries, for example.

Laura Cadden: Let’s talk about suppliers for Boeing and Airbus right now. Is there a company you think people could play that would also be at an advantage?

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Horaciou Marquez: Oh definitely. As the Boeing “Dreamliner” gets off the ground, it has a huge component of titanium and one of the main suppliers to the aerospace industry is titanium metal (TIE:NYSE), which should do extremely well in the next couple of years.

Titanium has also benefited with the ongoing materials rally globally. So in any pull back I strongly recommend people to look at titanium metals.

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Guzzling Less Fuel Could Make This Company Rich

Horacio Marquez has just uncovered a specialized company set for a 279% gain. It’s one of the only companies about to profit on a manufacturing trend estimated to reach $2.8 trillion in the coming months. This company is in a near-monopoly situation, and it’s dirt cheap - less than half its contracted cash flows. Here’s Horacio’s report.
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