Long DAL as it looks to crack the 61.8% Fibonacci retracement

12 มี.ค.

I bought DAL today as a long-term buy. This is a violation of a restraining order I put on myself, given my lousy track record with airline stocks. Why go there, now?

In bullet points:

• LUV is getting smoked today, based on news that BA will be unable to get anywhere close to its 2024 delivery commitments to LUV, thanks to the ongoing 737 MAX dumpster fire. DAL flies Airbus jets on the routes that compete with LUV and is poised to benefit.
  
• DAL, also today, issued a news release that they see Q1 revenue in the upper half of their guidance range. During an industry conference today they also stated that 9 of the top 10 booking days in their history have occurred this year. They see no demand slow-down.
  
• At the same conference, Jamie Baker, Morgan Stanley's airline and aircraft leasing analyst, stated that the big 3 airlines currently trade at a fwd P/E which is 16 turns lower than the overall market, something that hasn't happened since the 2008 Great Financial Crash.
  
• DAL is the only airline to own a refinery in order to mitigate jet fuel cost increases. This refinery has caused large losses in the past, during times of lower fuel prices. The facility is now fully upgraded and jet fuel prices are rising. Therefore I expect this refinery to become a source of relative competitive strength .
  
• At the beginning of the COVID pandemic, DAL more than doubled their total debt to cover the cost of job buyouts for 17k employees in the face of evaporating demand, as well as the ongoing fleet rejuvenation. This has cost them their investment grade rating from S&P and Fitch, but has also led to a much younger and more fuel efficient fleet. Over the last 3 years, they were able to repay 88B of the 18B in added debt and expect that, by the end of 2024, they will have their debt metrics back to investment grade standards.
  
• Once the company reaches investment grade, they plan to expand capital returns to shareholders.
  
• The stock has reached the 61.8% Fib retracement level from the 2023 meltdown. It failed there in November of last year and January of this year. I expect that the stock will succeed this time around, and at least recapture the 2023 high.
  
• If I am wrong, I will probably stop out of the stock just underneath the 50% retracement level at $40.
  

I don't have the greates conviction for this buy since, again, I don't have a great track record with airlines. But I do think that DAL is an excellent operator, and I'll give this one a chance. If I am wrong, it'll again be years before I touch another airline.

22 มี.ค.

บันทึก

The Fed statement yesterday was very supportive for most stocks, DAL included, and the party continued today. So, we're up 10% on the DAL position and well on our way to the TP around $50.

I'm raising my stop to the entry price.

1 เม.ย.

ปิดการเทรด: ถึงเป้าหมายการทำกำไร

There are still a few cents to go before the 2023 high is fully recaptured, but it's close enough for me. It's only been 11 days since I entered this position, and it has gone basically straight up. At this point, DAL seems stretched, and I got where I wanted to get by the end of the year in just a few days. So, I decided to take the win.