Trade of the Day: Avianca Holdings (AVH)

by Jon Markman | November 14, 2013 7:44 am

Avianca Holdings (AVH[1]) is the holding company of Avianca Airline, which is the largest air transportation company in Colombia, and one of the three largest in South America. The company is also the oldest airline in South America, having gotten its start in the early 1920s. It has experienced a lot of ups and downs since, and unfortunately had its reputation sullied badly when drug lord Pablo Escobar ordered one of its planes blown up in 1989, and later when a jet headed for New York crashed in 1990. The loss of life and lawsuits hounded the company for the next decade, ultimately forcing its bankruptcy in 2004. It was bought in receivership by a Colombian energy and farming magnate for $64 million, and after a lot of investment in jets and marketing it went public again with a $1.5 billion market cap.

The airline now flies 140 planes with an average age of only four years into 100 cities, including as far east as Madrid and as far south as Buenos Aires. The company has told investors it plans to invest as much as $5 billion in the next half decade to further expand and upgrade its fleet. The latest step along that path was a merger with Taca, another Central American airline, in 2010. From a marketing standpoint, the company has borrowed a few pages out of the playbook of JetBlue (JBLU[2]) and Southwest Airlines (LUV[3]) in the United States by providing low-cost flying while still offering frills such a complimentary meals and individual entertainment screens, even in economy class.

AVH went public a week ago at $14, and has traded higher since in sync with a drop in aviation fuel prices and a global upward reappraisal of airline shares.

Recommendation: Buy AVH for a $16.50 target.

Jon Markman operates the investment firm Markman Capital Insights[4]. He also writes a daily trading newsletter, Trader’s Advantage[5], and CounterPoint Options[6], a service geared towards helping individual traders make steady, consistent profits with the VIX. . Check out his Top Stock for 2012 here[7].

Follow Jon Markman[8] at Google+.

Endnotes:

  1. AVH: http://studio-5.financialcontent.com/investplace/quote?Symbol=AVH
  2. JBLU: http://studio-5.financialcontent.com/investplace/quote?Symbol=JBLU
  3. LUV: http://studio-5.financialcontent.com/investplace/quote?Symbol=LUV
  4. Markman Capital Insights: http://www.markmancapital.net/
  5. Trader’s Advantage: http://www.jonmarkman.com/
  6. CounterPoint Options: https://order.investorplace.com/index.jsp?sid=SE8121
  7. Top Stock for 2012 here: https://www.investorplace.com/wp-admin/www.investorplace.com/2011/12/short-europe-emerging-markets-hershey-consumer-staples/
  8. Jon Markman: https://plus.google.com/109535523304238577573?rel=author

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