Immigration, terrorism, even foreign currency manipulation — if it’s “a thing,” Donald Trump has already commented on it. Even if it isn’t a thing, our president has a tendency to make it an issue. This has been the modus operandi of the Donald Trump phenomenon. Say something utterly shocking, and then future actions won’t seem so bad. Like it or not, airline stocks are clamoring for more.
The real-estate mogul often reaches — and many times, crosses over — the fine line between criticism and disloyalty. As an example, Donald Trump’s tirades against segments of the military — and John McCain in particular — weren’t helpful. Mere politicians would have had their names permanently smeared as unpatriotic, even treasonous. Not “The Donald” — he is virtually untouchable.
And his attacks on American infrastructure have resulted in many smiles for investors and executives of airline stocks.
Before he became president, Republican candidate Donald Trump — when he wasn’t attacking Mexico — often targeted domestic airports. He once notoriously quipped that “Our airports are like from a third world country.” He specifically called out LAX, and New York’s three major airports — LaGuardia, John F. Kennedy and Newark. Adding insult to injury, he praised the accommodations found in Dubai, Qatar and China. Needless to say, these are countries with less-than-stellar relations with the U.S.
Welcome to the world of President Donald Trump, where you may be both ally and adversary in the same sentence.
But despite the obvious unpredictability, the president does have a gift for bringing home important issues. And this is primarily the reason why airline stocks are loving the former reality TV star. While indelicately stated, there is a lot of truth behind the infrastructure criticisms.
Best of all for airline stocks, Trump met with airline and airport executives late last week. The agenda was crystal clear — make American airports great again! By logical extension, this has strong implications for the labor market, as well as the broader economy. Also, the executives urged Trump to bring air traffic control under private control as opposed to the Federal Aviation Administration. As a Republican — he’s still one of those, right? — this proposal should be right up his alley.
If we can say anything about Donald Trump, he’s a man not afraid of taking action. Here are eight airline stocks that will get boosted bigly by “The Donald.”
Airline Stocks to Buy: Southwest (LUV)
Among the airline stocks that will benefit from Donald Trump, you really have to look at Southwest Airlines Co (NYSE:LUV). With their quirky and memorable advertisements, LUV is a fixture in popular culture. It’s also a discount leader, and who wouldn’t want to save a little coin, even if the economy is improving?
Better yet, the fundamental performance has been impressive. In its recent earnings report for the fourth quarter of 2016, LUV put out earnings per share of 75 cents. Although it fell short of the 90 cents that LUV earned at the same period last year, it exceed consensus estimates by 7%. Additionally, revenue in Q4 was $5.08 billion, an increase of 2% year-over-year, and beating consensus by 1%. Overall, this was Southwest Airlines’ 44th consecutive year of profitability.
Most importantly, what LUV has done for the financials is reflecting in the markets. Year-to-date, Southwest shares are up 12.6%, which is one of the better reads among airline stocks. Also, on the day of President Trump’s meeting with various airline executives, LUV closed up nearly 3%. And since the Nov. 8 election, investors have pocketed about 35%.
There’s a lot of reasons to LUV airline stocks, but Donald Trump has to be at the top of the list.
Airline Stocks to Buy: JetBlue (JBLU)
If any name among airline stocks could use a pick-me-up, it would be JetBlue Airways Corporation (NASDAQ:JBLU). Although JBLU saw a tremendous lift from the president meeting with airline executives — shares closed up 4% on Feb. 9 — it really hasn’t helped that much. On a YTD basis, JBLU is down a shocking 11.3%. Under any other circumstance, I would mimic the ground proximity warning system — pull up and pull out!
One of the telltale signs of potential trouble is in the financials. Sales growth for JBLU is still among the best compared to other airline stocks. However, that robust growth has been declining in recent years and in recent quarters. To me, that spoke volumes of the challenges associated with market saturation. It’s great that there are industry tailwinds such as lower fuel costs, but that won’t mean much if everybody is in the same boat.
The difference this time, with Donald Trump, is that he’s changing the game bigly. First off, nobody expected him to win. Furthermore, the generally business-friendly Republicans were on the edge of implosion. But that all changed on Nov. 8. Now, airline stocks have a president who’s aiming to get rid of “burdensome regulations.” He’s also sympathetic to the idea of privatizing air traffic control.
It was hard to like JBLU without “The Donald.” Now that he’s on board, I’m willing to give JetBlue a shot.
Airline Stocks to Buy: Alaska Air Group (ALK)
Among airline stocks — many of which can be quite volatile — Alaska Air Group, Inc. (NYSE:ALK) has been one of the most reliable names. In fact, ALK is in the category of dependable investments of any category. Since 1980, ALK stock has returned an average of nearly 18%. That impressive figure is buoyed due to shares only suffering nine annual losses in those 37 years.
Plus, it was one of the few investments to record a profit in 2008.
Unlike legacy companies that see their best years in their infancy phase, ALK is having a Tom Brady moment. That is, they are only getting better with age. So far this decade, Alaska Air is averaging returns of nearly 42%. That’s simply astounding. Then again, such a performance can be expected when the last time shares hit red ink was in 2007. To put that into perspective, George W. Bush was president and “Myspace” was still a thing.
Love him or hate him, Donald Trump has been working the White House like no other leader before him. This makes the case for ALK stock all the more compelling. When you look at the technicals for Alaska Air, you just see clear blue skies. With President Trump essentially ensuring positive tailwinds, all ALK has to do is show up and not do anything stupid.
With the former, that might be a challenge. For the latter, it’s automatic.
Airline Stocks to Buy: Hawaiian Holdings (HA)
Hawaiian Holdings, Inc. (NASDAQ:HA) is better known through its subsidiary, Hawaiian Airlines. Compared with other airline stocks, HA sells itself. The reason is patently obvious. Unless you’re NFL commissioner Roger Goodell, who wouldn’t want to go to Hawaii? It’s an island paradise, and nobody does Hawaiian service and hospitality better than HA. Even Donald Trump would approve, while begrudgingly admitting that former President Barack Obama was born in the state.
That’s a good thing too, because HA could use a helping hand. Enthusiasm for Hawaiian Holdings ran very high when the former reality TV star took home the election. Between Nov. 8 and Dec. 21, Hawaiian Holdings jumped up nearly 27%. Since then, however, it has been mostly downhill, with HA stock shedding 15% in the markets. Now, its post-election bump is netting a comparatively pedestrian 10%.
Investors, though, shouldn’t worry. HA has two things going for it. First, Donald Trump hates losing. Amid his heated exchange with judicial authorities over his travel ban, the president can’t afford to lose face. Making airline stocks great again will be personal to “The Donald.” Second, despite recent setbacks, the overall technical picture for HA looks solid. It has been charting a bullish trend channel since the spring of 2013.
As professional traders are quick to say, the trend is your friend until it ends. HA still has a ways to go before the latter comes true.
Airline Stocks to Buy: Delta (DAL)
When it comes to industry-wide tailwinds, it’s usually the smaller firms within the sector that receive the most benefit. With their typically margin-sensitive structures, small firms tend to extract every penny of their newfound opportunity. But with airline stocks, the circumstances are a little bit different. We have a president who really wants to go to bat for American companies. That’s why I’ve changed my tune for Delta Air Lines, Inc. (NYSE:DAL).
For starters, DAL has been aggressively eyeing expansion. With an enterprise value of over $40 billion, and on-hand cash of nearly $2.8 billion, DAL can take some risks. Indeed, they should take some risks, as airline stocks aren’t getting less competitive. Furthermore, DAL was already planning on upgrading its hubs throughout its domestic networks. Trump’s expressed sentiments during the executive meeting are perfectly aligned with Delta’s own interests.
Shortly after the meeting, DAL released a statement saying that they intend to hire as many as 25,000 workers. This is initially planned to occur over the next five years. Combining new demand and attrition replenishment, it’s not 100% clear what the allocation will be. However, the markets have responded positively to the news. If anything, DAL can expect a tweet of approval from the very top.
Donald Trump is the tide that will lift all boats, even ones as big as DAL.
Airline Stocks to Buy: United Continental (UAL)
Of all the major airline stocks, United Continental Holdings Inc (NYSE:UAL) may be the most relieved that Donald Trump has taken the White House. Granted, that sounds a little strange to say considering the antics of our commander-in-chief — and poorly written executive orders such as the travel and immigration ban — aren’t exactly good for business. As an added challenge, Trump is perceived by many to give America — and American companies — a bad name.
There are industry trends that are negatively impacting UAL as well. Regional traffic was down noticeably in January, perhaps due to lower fuel costs incentivizing driving over flying. Internationally, European destinations were off by 2.5% year-over-year last month. Such setbacks for UAL are exacerbated by the fact that its fundamentals are a little lagging. For example, United’s revenue growth and net margins are middling compared to other airline stocks.
This pedestrian behavior has no doubt contributed to volatility for UAL stock. In 2015, UAL investors lost nearly 14% in their portfolio. The following year was looking like a real disaster by the midway point. However, Donald Trump may have saved UAL from ignominy. Since his election, United Continental shares are up over 26%.
Thanks to the president’s adamant support, UAL should have a much smoother ride moving forward.
Airline Stocks to Buy: American Airlines (AAL)
There are only a few companies in the world that can legitimately say that they don’t need any help. Even for those that don’t, there’s nothing wrong with doing a little networking. After all, you may not need assistance now, but tomorrow could be a different story. That is what makes American Airlines Group Inc (NASDAQ:AAL) CEO Doug Parker’s decision to skip the Donald Trump meeting all the more bizarre.
I don’t care who you are — you never turn down an invite from the President of the United States. Even if you didn’t vote for the guy, it’s still the highest honor one can receive. So I doubt the official story that this had nothing to do with politics. Besides, AAL is one of the choppiest names among airline stocks. Any kind of support — even from disagreeable sources — would be a lifesaver. AAL is the beggar, not the chooser.
Despite the disrespectful overture, I still like AAL. Maybe not as much as the other airline stocks, considering Trump’s ego and long memory. But I think that “El Presidente” will act on the behalf of AAL’s best interests, even if it’s not reciprocated.
There’s a lot at stake here and Trump can’t afford to take the low road all the time. Plus, it will help him make the case that he’s the president for all Americans.
So yes, AAL is a solid pick, even if the CEO is acting like a sourpuss.
Airline Stocks to Buy: Spirit Airlines (SAVE)
I have to make a confession. Spirit Airlines Incorporated (NASDAQ:SAVE) is a pretty awkward pick for me. This was one of the first contributions I made for InvestorPlace, and of course, it had to be bearish. Basically, I stated that SAVE stock was overvalued due to its statistical performance in the markets. People probably thought I was nuts. But when SAVE stock collapsed nearly 45% in the markets, the idea wasn’t crazy anymore.
Here’s the other awkward part. Even now, a bearish position against SAVE would be profitable against the time of my article. In fact, Spirit Airlines is down nearly 30% from March 19, 2015.
So what caused my about face? Do I have another statistical argument for SAVE stock, only this time for a long position?
I wish I did, but I don’t. If we’ve learned anything at all about the 2016 election, over-reliance on statistics does have its risks. I think the bull case for SAVE stock is based on the fundamentals, and those fundamentals spell Donald J. Trump. Regardless of his critics, there’s one thing they can’t deny. The man is working it.
I don’t think it’s any coincidence that SAVE stock surged after Trump’s victory, and this probably isn’t the last we’ll hear from Spirit Airlines.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.