United Continental Holdings Inc: Why I’m Staying Away From UAL

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There is a lot that goes into finding the right stocks for your portfolio. Some investors focus on fundamentals. Others look at the charts. And a few look strictly at behavior and investor psychology. I think the majority of investors — myself included — use a combination of all three.

United Continental Holdings Inc: Why I’m Staying Away From UALAll of that analysis takes time, and a lot of it. Don’t get me wrong, I love the work I do and I know it pays off, but I will say there are also instances when it comes time to throw analysis out the window and just go with your gut.

Or as investing master Peter Lynch says, invest in what you know.

People know so much more about investment opportunities than they give themselves credit for and often equate pleasant lifelong experiences with a nostalgia that makes them overlook the future.

At the end of the day, you create the market. I bet seven of the next 10 items you use or see in your kitchen belong to publicly traded companies, and odds are good that company’s stock has hit an all-time high recently.

If you want a great investment idea, all you have to do is pick your head up and take in the world around you.

Positive experiences lead to winning stocks, but there’s also a flip side to that. Unpleasant experiences can help you steer clear of the market laggards, and often times you will see these experiences manifest into share price movements that happen relatively quickly.

Let me give you an example. A couple years ago I had a terrible experience at a New York City parking garage — I mean, who really likes driving in NYC? I vowed to never park there or any other garage owned by the same company again, and apparently I wasn’t the only one.

One month later a news headline came across my computer screen telling me that the company’s shares were down 25%. I hadn’t even known the company was publicly traded. Sure, there was a sense of vindication, but at the same time, I was disappointed that I hadn’t jumped at the opportunity to capitalize on a direct experience.

Now, I do want to say one thing. I’m not a big fan of shorting stocks, although I will occasionally as a hedging tool. That said, I do know that bad companies aren’t worth the risk of investing in for the future either.

How This Impacts UAL Stock

The reason I’m bringing this up is because I recently had a terrible encounter with United Airlines, otherwise known as United Continental Holdings Inc (UAL). It was the third time in five years. And honestly, if my wife hadn’t booked the trip through our travel agent I probably would have avoided the airline altogether.

Anyway, the coldness of the company’s representatives added misery to an already-anxious moment that could have turned out to be a disaster for my family.

I know I’m not unique in having airline and airport horror stories. Kind of like driving in New York City, who hasn’t had a bad experience there at one time or another? However, there are many people out there who see investment opportunities within the sector. I get the bull argument that fewer airlines, packed planes and more folks travelling adds up to pricing power.

But there’s also the passenger bane: The lie of on-time departures where gates are closed but the plane sits on the tarmac for hours, the never-ending fees and the poor customer services. My gut is telling me to stay away from UAL stock and I’m going to listen. I just don’t see this as the kind of product — even with its monopolistic tendencies — worth investing in, and for me, United is the worst of them all.

UAL stock is down 16.5% so far this year. On the other hand, Southwest Airlines Co (LUV), which is a carrier many people love, is breakeven. I think that underscores what happens when a company does right in an industry when it’s so easy to do wrong.

One final note: I love the song “Rhapsody in Blue,” which is the theme song for UAL stock. But that’s the only thing I’m buying from the company these days.

Curious what Wall Street insider Charles Payne really thinks? Get more behind-the-scenes insights, valuable market research and hands-on guidance including live stock recommendations from Fox Business’s rising star. Charles Payne’s Smart Talk is absolutely FREE for a limited-time only. Sign up today! As of this writing, he did not hold a position in any of the aforementioned securities.

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