Where next for Qantas?
The Qantas share price has soared 600 per cent since 2014. This has surprised many long-term investors, who view airlines as a bit like the Bermuda Triangle – a place where money is lost and never seen again. So, what’s happened? Are airlines now a great place to invest?
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.
john mclean
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Bought Air NZ 2 yrs ago, got a bonus div not long after, share price has slowly gone up since then, happy to keep for the time being but will watch closely.
Ron
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Why is everyone in the business so silent about BBY stockbrokers – as one day may be revealed much worse than most shares and life savings sitting in their trust a/c missind
Roger Montgomery
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not sure what you are implying Ron. care to elaborate?
ron.m.williams.3
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KPMG LIQUIDATORS last update 22/6 it appears the court cannot find out where all the money has gone and also the SEGC refuse to payout so what protection is there for all the problem stockbrokers
It is all on their website – read at your peril ;-)
Alan Lun
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I bought a huge amount of shares in REX when it was between 70c to 100c. I was aware of Buffett’s view on airlines. After careful considerations, I acted against my hero’s advice. I learned from Buffett that if the owners of an asset suffer for a long period of time, there is a good chance you can make money by being the owner because the sellers have gave up hopes.
Roger Montgomery
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Thanks Alan,
Share price now where it was 12 years ago. in the short run the market is a voting machine, in the long run – a weighing machine.
Alfred
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Very interested to hear thoughts on the small cap alternatives in the Australian airline industry. At first glance, the numbers on regional and specialist carriers like Rex and Alliance look quite ok.
Wesley Horn
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In light of all we know about the airline business and what I’ve read about Warren Buffett, I absolutely can not make any sense of his investment in airlines. Of all people, why would he even bother at this stage of his life? Doesn’t make any sense at all and contradicts his investment philosophy. I am a humble investor and no matter what, there’s no way I’d touch airlines unless I was a trader.
Sam
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There is a credible bull case for Qantas.
Just to clarify, Warren Buffett chose to recently invest in airlines (not Ted and Todd). He and Charlie Munger discussed their reasoning at the annual Berkshire Hathaway meeting.
Roger Montgomery
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Hi Sam,
You would be helped by listening to Charlie Munger at this year’s Daily Journal AGM. Here’s a section that may be relevant regarding compromise:
Question 34: “I was hoping to gain some insight regarding your and Warren’s discussions into airlines. Whether or not it was a light-bulb that went off in a certain year. Or whether it morphed over time. Just trying to get an idea about when you got open minded about maybe investing into airlines and how you changed your mind.
Charlie: Well, we did change our mind. For a long time, Warren and I (painted over) the railroad because there were too many of them, and it was too competitive, and union rules were too crazy. They were lousy investments for about 75 years. And then they finally…the world changed and they double decked all the trains and they got down to four big rail systems in all the United States in terms of freight and all of a sudden we liked railroads. It took about 75 years. Warren and I never looked at railroads for about 50 years, and then we bought one. (link)
Now airlines, Warren use to joke about them. He’d say that the investing class would have done better if the Wright Brothers would never have invented flight. But given the conditions that were present when the stock was purchased and given the conditions of Berkshire Hathaway where it was drowning in money, we thought it was ok to buy a bunch of airline stocks. What more can I say? Certainly it’s ok to change your mind when the facts change. And to some extent the facts had changed, and to some extent they haven’t. It is harder to create the little competing airlines than it was. And the industry has maybe learned something. I hope it works better, but I don’t think its…I think the chances of us buying airlines and holding them for 100 years is going to work that well. I think that’s pretty low.”
mark morawitz
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Airlines have a lot in common with private hospitals. Rising costs and an environment where good outcomes only meet expectation not exceed them.If I justified not owning one I wouldn’t own the other even with a twenty year tail wind.
Luke Fennell
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I also think the risk that more business will be done via better quality video conferencing is becoming higher and may only need a fuel spike to push larger companies to install the hardware necessary to avoid a lot of flying altogether…..permanently. There’s then the whole bird-flu/SARS risk that could also cause a permanent shift in how we use video conferencing – and reduce business travel.
Chris Pyad
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Maybe, maybe not….
That argument about video conferencing has been around for 10 years and the systems and internet bandwidth to support it have both been around for that same time period…I used to think that too (working in the industry). But it never eventuated (yet). People still like to meet and shake hands. VC definitely has its place though…