With a big disclaimer that I am not a financial analyst and am not offering any sort of investment advice to you, I am contemplating adding some Delta stock to my portfolio.
I’ve forayed into buying airline stock twice before. The first experiment, buying and later selling United Airlines stock just after the company emerged from bankruptcy protection, was a great success. I made a tidy sum buying low and selling high.
But I got burned big time with American Airlines. I bought low in 2011, thinking the stock would rebound as the economy improved. Instead, American Airlines declared bankruptcy and the stock dropped to near zero. I foolishly dumped everything at about 20 cents per share. Unlike most companies which emerge from bankruptcy protection, American never cancelled its common stock. Had I held on and not sold I would have made an even more tremendous return than on United.
And now I turn to Delta, an airline stock that seems undervalued to me. Delta is trading at just under $58/share. The stock is up over 12% the last month due to very strong first quarter earnings and CEO Ed Bastian expects the growth to continue:
With the momentum in our business and our American Express contract renewal, we have increased confidence in achieving our full-year plan of top-line growth, margin expansion and double-digit earnings growth.
Delta’s P/E ratio is about 9.5 (Forward P/E is 8.0), which represents the stock may be undervalued. I also like that Delta offers shareholders a dividend.
I’ve also been covering Delta for years. I see how well the airline does. It makes its customers happy, delivers consistent on-time performance, and offers a generally competitive product domestically and internationally. As oil prices have remained fairly steady this year, I don’t see that trend changing.
My interest in Delta is more than a gut feeling that the airline will continue to grow and out-perform. But that emotional attachment to airlines always worries me. Part of me just wants to leave all my investments to people who study these sorts of things all day. And yet Delta seems like a good deal now.
Any thoughts on my potential acquisition of DAL stock?