How does Roger Montgomery view the desirability of owning airline stocks?
Roger Montgomery speaks with Ross Greenwood on Radio 2GB regarding the current state-of-play for Australian airlines, how the global landscape is both pressuring our local players and will also shape their future – and why his in “Value.able” investing strategy highlights why Australian airline stocks are unlikely to represent strong growth investments for some time to come. Listen here.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Matthew Smith
:
Best airline model I have seen – Chorus Aviation in Canada
Fuel is a pass through cost
Contracted for specific number of flight hours per year
Regional based flights that the big guys dont want to do – mostly use Dash 8s
Does zero ticket sales
Whilst economically airlines are not the greatest of companies.
That said could anyone here who is “rational”, honestly not buy Qantas if it traded at 10 cents today with same assets and current earnings??
At a certain price even these companies become a screaming buy – learn to love your dogs!!
PS
Speaking of dogs did anyone buy PMP Limited in the last few months considering it hit a new 52week low and was trading far below what its long term earnings value??
Roger Montgomery
:
The big question is whether revenue (after labour and overheads and tax) can cover replacement cost of aircraft…Regarding PMP, little is known about the takeover approach at reportedly 68-78 cents. If the board is working for its owners, they should be putting all info to shareholder/owners to allow them to decide, no?
Andrew
:
Pretty spot on with your comments Roger. I remember having a similar conversation when someone asked me about buying into qantas. Airlines, like car manufacturing have the difficulty that prices seems to be going lower and lower whilst costs stay sable and/or increase.
My advice was that if you want to buy a stock that is connected with tourism, travel etc than there are some good back door or indirect options such as FLT,WEB and WTF that have positive attributes for an investor.
Australian airlines, unless they can some how drastically reduce their costs cannot compete internationally on price. Even then, i still could not fathom an investment in the airline industry.
Roger Montgomery
:
Thanks ANdrew, Poor investment candidates on so many levels and for so many reasons.