Top Airline Short Squeeze Stocks

by Fred Fuld III

Many airline stocks have taken a hit over the last month, and even the last couple trading days. Several of these airline stocks are heavily shorted. When stocks rise quickly in price for whatever reason, short sellers scramble to cover their positions by buying shares, and causing the price of the stocks to increase even more.

Traders and investors can make money on the long side from short squeezes. One technique that stock traders utilize is buying short squeeze stocks, companies have been heavily shorted. Here is a more extensive explanation of short squeezes.

When you short a stock, it means that your goal is to make money from a drop in the price of a stock. Technically, what happens is that you borrow shares of a stock, sell those shares, then buy back those shares at a hopefully lower price so that those shares can be returned. This all happens electronically, so you don’t actually see all the borrowing and returning of shares; it just shows up on your screen as a negative number of shares.

Short selling can be profitable, but sometimes when the stock moves against the short sellers, and begins to rise, the short sellers jump in right away to buy shares to cover their positions, creating what is called a short squeeze. When a short squeeze takes place, it can cause the share prices to increase fast and furiously. Any good news can trigger the short squeeze.

Some traders utilize this situation by looking for stocks to buy that may have a potential short squeeze. Here is what a short squeeze trader should take into consideration:

Short Percentage of Float ~ The float is the number of freely tradable shares and the short percentage is the number of shares held short divided by the float. Amounts over 10% to 20% are considered high and potential short squeeze plays.

Short Ratio / Days to Cover / Short Interest Ratio -This is probably the most important metric when looking for short squeeze trades, no matter what you call it. This is the number of days it would take the short sellers to cover their position based on the average daily volume of shares traded. This is a significant ratio as it shows how “stuck” the short sellers are when they want to buy in their shares without driving up the price too much. Unfortunately for the shortsellers, the longer the number of days to cover, the bigger and longer the squeeze.

Short Percentage Increase ~ This is the percentage increase in in the number of short sellers from the previous month.

Here is one example from the list below. American Airlines (AAL) is a stock that is heavily shorted. As a matter fo fact, 30% of the float is shorted. (The float is the number of shares of the company that are freely tradeable.) Plus, the number of shares shorted has increased by 5% over last month.

So what airline stocks are heavily shorted that may be worth a closer examination? Check out the following list, but be aware, that often some stocks are heavily shorted for a reason. All these stocks have significant short metrics.

Possibly a short squeeze will cause a few of these to fly higher.

Stock	Symbol	% of Float	Days to Cover
American Airlines	AAL	30%	1.5
Allegiant	ALGT	15%	5.8
Spirit Airlines	SAVE	23%	0.8
United Airlines	UAL	11%	0.5

Disclosure: Author didn’t own any of the above at the time the article was written.

A Quick Summary of Warren Buffett’s Berkshire Hathaway Annual Meeting

by Fred Fuld III

In case you missed watching Warren Buffett’s Berkshire Hathaway (BRK-A) (BRK-B) Annual Meeting, or if you don’t feel like watching the four and a half hour rerun, it may be easier to see a quick Cliff Notes-like list of important points from the meeting.

Here is a quick summary of the meeting that was held online yesterday, May 2, at 4 pm ET, 1 pm PT.

Buffett started out with a PowerPoint presentation about the history of the United States. He was born during the 1930 depression.

The Depression

Warren Buffett was born August 30, 1930. The day before, the Dow Jones Industrial Average was 240.42, which was up 20% from the 1929 low. On September 1o, 1930, the DJUA reached a high of 245. No one realized that the country was in a Depression yet. On July 8, 1932, the DJIA dropped to 41.22. In other words, $1,000 became $170 in less than 2 years.

The FDIC

If we had the FDIC 10 years earlier, it would have been a much different experience. It was tne good thing that came out of Depression, as over 4000 banks failed. The FDIC has not cost the American taxpayer a dime. It is paid for by bank assessments.

Getting Back to Even

It was January 4, 1951 before the stock market got back to 240.85, more than 20 years to get back to even.

In 1954, the Dow went from 280 to 400 at the end of the year

The stock market provided a 100 to 1 return from 1954 (the year he graduated from college) to today.

Berkshire Business Segments

In regards to Berkshire’s business segments, insurance profit margins have improved due to a reduced number of accidents. Railroad and utilities revenues are down.

Buybacks

Buybacks are good, “when conditions are right.” “It’s a way of distributing cash to shareholders.”

Occidental Petroleum

Admitted mistake in buying Occidental Petroleum. “It doesn’t work at $20 a barrel.” “Production is going to go down in the next few years.”

Airline Stocks

Buffett announced that Berkshire sold all airlines in the portfolio and they were sold at a loss.

Splitting the A Shares

A question was asked about the possibility of splitting the A shares because, the questioner gave an example of needing $60,000 for his retirement, having to sell one share for $300,000 with a cost basis of $100,000, and having to pay a huge capital gains. Buffett explained that it is not an issue as A shares can easily be converted to B shares at any time [assuming without tax consequences, but check with your accountant].

Berkshire’s Past Performance

Buffett said that investing in an S&P ETF is the best way to invest for the long term, and doesn’t recommend buying individual stocks or short term trading. However, one questioner asked why Berkshire has been underperforming the SPY for 15, 10, and 5 years, and even year-to-date. Buffett admitted to the underperformance, and said that no one will work harder than himself and his staff to provide the best performance.

Credit Cards

He said to pay off credit cards; don’t invest until you pay them off. It is the best way to earn 18%. You shouldn’t even be paying 12%.

US Debt Defaults

The US will never default on its debt as long as the debt is issued in US dollars, as it can always print more money.

Government Bailouts

None of the Berkshire businesses have received any government bailouts.

There was a lot more but these were some of the major topics.

If you want to see a list of the Berkshire Hathaway stocks, before the sale of the airline stocks, see the article on What Warren Buffett has Been Selling.

Happy investing.

Disclosure: Author didn’t own any of the above at the time the article was written.

Top Airline Stocks for Summer Travel

by Nkem Iregbulem

This summer is the 10th consecutive summer to see an increase in the number of passengers flying. Airline for America (A4A) expects the number of passengers to rise 3.4% from 248.8 million travelers last summer to 257.4 million travelers this summer. Low airfares, higher household net worth, and a strong U.S. economy could all be driving this record high air travel. In response to this growing demand, airlines have added more seats to existing planes and increased the capacity of new ones.

Airline stocks may benefit from this busy travel season. These include Alaska Air (ALK), American (AAL), Delta (DAL), SkyWest (SKYW), Spirit (SAVE), Southwest (LUV), and United Continental (UAL). The ALK, DAL, LUV, and SAVE stocks are traded on the New York Stock Exchange, and the SKYW, UAL, and AAL stocks are traded on the NASDAQ exchange.

Alaska Airlines is the fifth largest airline in the U.S. when measured by fleet size, passengers carried, and destinations served. With its fleet size of 334, Alaska Airlines flies to over 100 domestic and international destinations. The airline is headquartered in Washington and was founded in 1932. Alaska Air has a market cap of $8.01 billion and pays a dividend yield of 2.16%. The stock trades at 14.34 times trailing earnings and at 11.10 times forward earnings. It has an excellent price-to-sales ratio of 0.95 and a price-to-book ratio of 2.02. The company boasts a 3-year revenue growth rate of 13.86% and a 5-year revenue growth rate of 9.89%.

American Airlines is the world’s largest airline when measured by number of passengers carried, fleet size, revenue, and destinations served. Founded in 1926 and based in Texas, the airline serves 350 destinations in over 50 countries. It has a market cap of $14.09 billion and pays a dividend yield of 1.26%. The stock trades at 8.26 times trailing earnings and at 6.03 times forward earnings. It has an excellent price-to-sales ratio of 0.33 and a price-to-book ratio of 1.25. The company enjoys a 3-year revenue growth rate of 2.81% and an even better 5-year revenue growth rate of 10.74%.

Delta Airlines is ranked the world’s second largest airline when measured by the number of passengers carried and fleet size. Headquartered in Georgia and founded in 1924, it serves 325 destinations across 52 countries. Delta has a market cap of $40.46 billion and pays a dividend yield of 2.59%. The stock trades at 9.86 times trailing earnings and at 8.85 times forward earnings. It has an excellent price-to-sales ratio of 0.92 and a price-to-book ratio of 2.90. With its revenue increasing each fiscal year since 2016, Delta enjoys a 3-year revenue growth rate of 2.97% and a slightly better 5-year revenue growth rate of 3.30%.

SkyWest is the largest regional airline in North America when measured by fleet size, number of passengers, and destinations served. Based in Utah and founded in 1972, it flies to over 250 destinations across in the United States, Canada, Mexico, and the Bahamas. SkyWest has a market cap of $3.11 billion and pays a dividend yield of 0.79%. The stock trades at 9.99 times trailing earnings and at 10.12 times forward earnings. It has a normal price-to-sales ratio of 1.02 and a price-to-book ratio of 1.56. SkyWest’s revenue has increased each fiscal year since 2015, giving it a 3-year revenue growth rate of 1.34% but a 5-year revenue growth rate of -0.47%.

Spirit Airlines is an ultra-low-cost carrier and the seventh largest airline in the United States. Based in Florida and founded in 1983, it serves 76 destinations across Central America, South America, and the United States. Spirit Airlines has a market cap of $2.88 billion and does not pay a dividend yield. Spirit has a fleet size of 75 and flies to 76 domestic and international destinations. The stock trades at 10.27 times trailing earnings and at 7.15 times forward earnings. It has an excellent price-to-sales ratio of 0.79 and a price-to-book ratio of 1.37. Spirit Airlines boasts a 3-year revenue growth rate of 15.77% and a 5-year revenue growth rate of 14.97%.

Southwest Airlines is the world’s largest low-cost carrier. The airline carries more domestic passengers than any other United States airline. Based in Texas and founded in 1971, it serves just over 100 destinations within the United States and 10 other countries. Southwest has a market cap of $29.82 billion and pays a dividend yield of 1.31%. The stock trades at 13.06 times trailing earnings and at 11.95 times forward earnings. It has a normal price-to-sales ratio of 1.40 and a price-to-book ratio of 3.05. Southwest enjoys a 3-year revenue growth rate of 3.48% and a slightly better 5-year revenue growth rate of 4.41%.

United Airlines is another large airline. Founded in 1926 and headquartered in Illinois, it serves over 200 domestic destinations and over 300 destinations in total across five continents. United Continental has a market cap of $24.13 billion and does not pay a dividend yield. The stock trades at 8.63 times trailing earnings and at 8.07 times forward earnings. It has an excellent price-to-sales ratio of 0.59 and a price-to-book ratio of 2.34. With its revenue increasing each fiscal year since 2016, United has a 3-year revenue growth rate of 2.94% and a 5-year revenue growth rate of 1.53%.

Maybe some of these airline stocks will be flying high.