Are any airline shares price shopping for on sale?
Two traders grappled with that query on Tuesday because the group slid on issues round a gas scarcity stemming from this weekend’s cyberattack on a major U.S. pipeline.
The U.S. Global Jets ETF (JETS), a basket of 39 airline shares, ended buying and selling down greater than 1.5% on Tuesday. It is down about 8% from its latest highs made in March.
“Not all airlines are created equal,” mentioned Nancy Tengler, chief funding officer at Laffer Tengler Investments.
“Southwest is in a singular place to return out of this stronger,” she advised CNBC’s “Trading Nation” on Tuesday, noting the corporate’s “strong history in hedging oil prices.”
Southwest has hedges in place that turn into worthwhile when crude oil costs attain $65 and $70-80 a barrel. Another “really aggressive hedging program” will start in 2022, Tengler mentioned. Crude oil costs rose to simply over $65 a barrel on Tuesday.
Southwest also announced that it’s going to begin hiring new flight attendants for the primary time since earlier than the Covid pandemic put a pause on the economic system on account of sturdy demand.
“Once the pipeline gets back on track, this is a company that you would want to take advantage of the weakness in because it’s going to be a strong medium and long-term player,” Tengler mentioned. “Mostly leisure travel. Doesn’t need to wait for business travel to come back. We’re owners and we would be buyers in here.”
Southwest discovered one other fan in Bill Baruch, founder and president of Blue Line Capital and Blue Line Futures.
“I’m very bullish on crude oil. I think crude oil can get to $100 over the next 18 months and I think that’s going to be a headwind down the road for airlines. Southwest is very good, very well positioned in that given their hedges,” Baruch mentioned in the identical interview.
Having lately damaged above a key pattern line, the stock could be a purchase on a pullback to round $54 a share, Baruch mentioned, citing a chart.
Southwest shares ended buying and selling down over 2.5% at $59.78 on Tuesday.
Baruch’s different decide was fellow low-cost service Spirit Airlines.
“I own Spirit Airlines and I like Spirit Airlines,” he mentioned, including that he’d be “very hesitant” about investing in airlines aside from Spirit and Southwest.
With journey selecting up once more, customers will seemingly be prepared to shell out for holidays within the months forward, Baruch mentioned.
“I think Spirit Airlines is going to be well positioned to capitalize [on] that,” he mentioned. “On a technical basis, I do think that you’ve seen a good rally out of the hole here in Spirit.”
“The $36 area has been very sticky, and although there’s a lot of resistance there, it’s holding that resistance and almost building sort of a flag-like pattern, which I find very bullish,” Baruch mentioned.
Spirit Airlines shares closed down almost 3% at $33.48 on Tuesday.
Disclosure: Tengler and Laffer Tengler Investments personal shares of Southwest Airlines. Baruch owns shares of Spirit Airlines.
