LUV: Diamond in the rough and investing opportunity
Since my AAL technical analysis, I thought about airlines for a little while. Which company would I feel the most comfortable and proud to invest in? Maybe it's because I'm from Dallas, but LUV has always been a company that, to me, has had the customer as the #1 priority as well as taking care of its workers.
As with all the airlines, LUV stock price took a huge hit from the shelter-in-place policies after coronavirus. It's stock pattern is basically the same as the other airlines, including DAL, the highest grossing airline company out there. However, the key is how healthy LUV was coming into this crisis. LUV announced that it had the lowest amount of debt it has ever had in its history before the coronavirus hit. They have a huge war chest and great balance sheet.
Right now, there are alot of talks of bailouts for airlines. Because how could we let airlines fail? How will we travel? So we shouldn't be surprised if more government money is injected into the airline industry. However, we should consider what that money may mean for the companies. Their bottom line would not get better. This is still a loan that has to be paid back. Just because a company is bailed out doesn't mean customers will start coming back. I expect that many will be wary to fly even when flights start to reopen. So, out of all the airlines, the one with the lowest debt-to-capital ratio will likely be in the best position to recover.
I expect other major airlines to cut services and layoff workers while charging more fees to cover costs. However, I do not see LUV following suit. It's not their MO. I think LUV will use the federal money (PSP) to support their workers first without the execs giving themselves bonuses.
But I do technical chart analyses. What do they say right now? LUV just reported it's earnings which was a surprise to the upside. As such, the buying increased TREMENDOUSLY, even more than the bottom after the initial corona drop. The accumulation is HUGELY diverging to the upside now with an RSI that has been diverging since Feb 27. Compare this to DAL, who had a less favorable earnings report. They've remained FLAT with a still declining accumulation/distribution associated with more selling than buying.
If you made 1,000% trading TSLA, AMZN or some other meme stock options, I would consider locking up your profits by buying LUV rather than dumping it back into risky options. You will still make alot of money (potentially 100% if LUV reaches pre-corona levels) and you can feel good about investing in a company that values people over profit. I will be buying a mix of stocks and long-term options going forward.
As with all the airlines, LUV stock price took a huge hit from the shelter-in-place policies after coronavirus. It's stock pattern is basically the same as the other airlines, including DAL, the highest grossing airline company out there. However, the key is how healthy LUV was coming into this crisis. LUV announced that it had the lowest amount of debt it has ever had in its history before the coronavirus hit. They have a huge war chest and great balance sheet.
Right now, there are alot of talks of bailouts for airlines. Because how could we let airlines fail? How will we travel? So we shouldn't be surprised if more government money is injected into the airline industry. However, we should consider what that money may mean for the companies. Their bottom line would not get better. This is still a loan that has to be paid back. Just because a company is bailed out doesn't mean customers will start coming back. I expect that many will be wary to fly even when flights start to reopen. So, out of all the airlines, the one with the lowest debt-to-capital ratio will likely be in the best position to recover.
I expect other major airlines to cut services and layoff workers while charging more fees to cover costs. However, I do not see LUV following suit. It's not their MO. I think LUV will use the federal money (PSP) to support their workers first without the execs giving themselves bonuses.
But I do technical chart analyses. What do they say right now? LUV just reported it's earnings which was a surprise to the upside. As such, the buying increased TREMENDOUSLY, even more than the bottom after the initial corona drop. The accumulation is HUGELY diverging to the upside now with an RSI that has been diverging since Feb 27. Compare this to DAL, who had a less favorable earnings report. They've remained FLAT with a still declining accumulation/distribution associated with more selling than buying.
If you made 1,000% trading TSLA, AMZN or some other meme stock options, I would consider locking up your profits by buying LUV rather than dumping it back into risky options. You will still make alot of money (potentially 100% if LUV reaches pre-corona levels) and you can feel good about investing in a company that values people over profit. I will be buying a mix of stocks and long-term options going forward.
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