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Airlines: Ouch!
At the onset of SLO2 I put one third of my portfolio into airlines. The airlines have done very poorly in the last few months. My thesis for airlines had three components and all three are still in play. I expect these components to come to fruition in two to three years, but the contest has a limited time horizon and I have no expectation any of them will recover by the end of this contest. I have sold all airlines from my SLO2 portfolio.
The first component was the likelihood of a consolidation. This notion is still in play and recently the expected merger of Delta (DAL) and Northwest (NWA) was finally announced. Such news heightens one's expectation for an eventual three-airline industry. But it was met with a yawn by the market and it fails to bring more money into either airline. There is further expectation that a European airline will buy one quarter of the combined airline. This is unlikely to happen before the end of SLO2. When this does happen, if this is a genuine cash deal then we will see a bump upward. However, if the investment is in more airline stock or if there is a deal that creates a separate class of stock diluting the value of common stock, we may not enjoy such a bump.
Is there any hope for gains in airline stocks? Keep reading "Airlines: Ouch!"
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