27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
With industry oligarchs now in control, the airline sector is hitting near record profit margins and pricing power, an analyst said Tuesday.
Following a decade that featured the worst industry downturn since deregulation, fuel volatility and multiple bankruptcies, Credit Suisse's Julie Yates said airlines are once again "investable" and launched coverage on the sector with an Overweight rating.
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Five major mergers have consolidated the U.S. airline industry into four carriers that control 80 percent of the domestic market. Domestic capacity remains six percent below that of 2007, leading to "sustained pricing power."
Consolidation has led to a "paradigm shift" in the industry, where airlines are focused on profits and returns instead of market share, Yates said.
Yates called the international picture "more mixed." But 84 percent of trunk routes between the U.S. and Europe are controlled by duopolies, "reducing the risk of irrational decisions" on capacity and pricing, Yates said.
Yates' top pick: United Continental Holdings Inc (NYSE: UAL), where Yates thinks a strong third-quarter will further buoy the stock. Continued margin growth, buybacks and the potential for a 2015 dividend should offer continued support. With an Outperform rating, Yates painted a $68 target on the carrier.
Yate's biggest loser: JetBlue Airways Corporation (NASDAQ: JBLU). Blue's shares are up 66 percent year to date based on what Yates sees as inflated expectations for new managers and a plan to boost incremental revenues on things like higher baggage fees. Yates hung an $11 target on Blue with an Underperform rating.
In other ratings, Yates introduced an Outperform for Delta Air Lines, Inc. (NYSE: DAL) and American Airlines Group Inc (NASDAQ: AAL) with targets of $56 and $52, respectively.
Yates also offered a Neutral rating and $32 target on Southwest Airlines Co (NYSE: LUV), where she figures cost pressures, labor tensions and slowing growth will limit the shares.
JetBlue was down 2.25 percent Tuesday. UAL gained 2.6 percent. Southwest was up 1.2 percent. American and Delta were nearly unchanged.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.