Do you think it is a good moment to buy IAG stocks?
To me actually, the stock lost its appeal since it left the previous brand names, Iberia and British Airways.
It is something similar to ArcelorMittal, though this one at least retained some of the old name.
With this kind of names companies lose some of its personality.
Anyhow, these are nothing else than personal considerations, of scarce value to the stock market.
What really matters in the stock market is if the stock rises or falls, and for that business have to make or lose money, or at least show signs that they are going to do so in the future.
The question is:
Does IAG make money?
The answer is yes, and the same can be said of the market that AIG depends on: tourism.
In fact, tourism is one of the most successful markets of the New Era.
Nowadays everybody wants to do tourism, especially young people, a lot of whom believe in The New Era and the esoteric concepts of a new and better world.
Curiously enough, the young people tend to vote leftish parties of any kind, but when it comes to travelling they are more capitalist than John Ford.
By the way the stock market is trading and how tourism is performing it is not difficult to see that IAG stocks are supposedly a good buy now.
The stock has made money last years.
Most of its investors are happy, although not so much those who bought at 8 Euros in 2015, however if they held the stock nowadays they would be close to break even.
Buy IAG stocks in the short-term
From a technical perspective, IAG is quite well, still above its 200 days moving average.
A clearly bullish stock and so we should buy if we were thinking in trading the short term.
Not even the last Barcelona attacks were enough to affect this company.
Lesson: any attacks in Barcelona or London should not worry us too much, as long as they are not too big.
In fact, those days when the stock falls 2 or 3% are very good moments to buy.
It is like getting a premium for free due to the psychological fear of the masses.
Nowadays we have a good chance of buying the stock, since the price is in a correction.
Good entry points were between 6.4 and 6.7.
The major support would be at 6.3, below of which the market would be dangerous.
The long-term MACD shows us that we are in bullish territory as well, confirmed by the price action.
Last years we had some bad signals in 2014 and a very good signal in 2016, after which a 50% bear market followed.
However, I am not saying that we should trade the short-side, but that the MACD worked well that time.
Unfortunately it does not always work the same way.
Anyway, in this cases and being companies with profits, it is always a good idea to buy when the stocks fall significantly, such as it happened in 2016.
Do you imagine being able to buy at 4 €?
Well, it is very complicated to do so in such moments.
It is very difficult to buy when everybody sells and is fearful, but it usually is the best way to win in the stock market.
A little of fundamental analysis of IAG
Well, if we see the numbers it is clear that it is a company that makes money and it is doing so in an increasing way, something good.
When a company wins more than two consecutive years, it is a good signal that its business is growing somehow.
In this case we can see how the net profit went from 120 millions in 2013 to 1.93 billion in 2016, a significant rise, especially knowing that revenues only increased from 18,570 to 22,570 billions.
Although we should not forget that the business was losing money in 2012, along all its competitors.
2012 would have been a good year to start “looking”.
For example, after having losses in 2012, the company presented profits in 2013, and again in 2014, which were even better than the previous year.
For instance, if we bought in September 2014 at 4,5 euros, we would have made a good “trade”.
As the balance sheet shows us the company has gone from 19,837 billions in assets to 27,373, growing 38%.
However, total debt has grown 46%.
Without being a disastrous number, it is something that I don’t really like, since it shows that IAG is recurring to more debt to grow marginally.
For instance, leasing has grown a 100% in 5 years reaching 5 billions, a significant amount.
This makes me cautious with this stock.
This is one of the most concentrated sector in the last years.
It seems clear that the sector tends to concentrate and we will end up having only a few remaining world companies.
However, the real competition has come with the likes of Ryanair and Easyjet, the ones causing the real problems to the traditional airlines.
Curiously enough among the traditional airlines, it is IAG the best performer in the stock market the last 5 years, especially compared to Air France-KLM which is struggling.
It is with the operative margin where Ryanair destroys its competition.
Well with the traditional cost structure it is very difficult to compete against the likes of Ryanair without the help of the State.
It will be that battle of cost structure which will be key in the future of the sector, among regulations, of course.
For the moment, IAG is one of the best traditional airlines.
Although I would rather go for Ryanair.
|Operative margin %||IAG||Ryanair|
Buy IAG stock for the long-term
IN the short-term I said it was the best bet to do to go long.
In the medium-term it is not the same, since I fear the current world bull market could end at any moment. The bull market in Wall Street is too long now.
The aero lines depend heavily on the world affairs, and are very sensitive to recessions.
When the United States and Europe enter in recession again, and it should be not too long before that, these stocks should suffer quite a lot.
However, my long-term perspectives are good with this sector.
For example, if we face a major bear market perhaps it could be a good idea to invest heavily in this sector, whether it is more traditional stocks like IAG or new ones like Ryanair.
All this despite the growing number of terrorist attack in the West.
It seems that not even a long streak of them can cause severe harm to the tourism ideal.
People are still buying tickets to London and Barcelona despite everything.
In a secular way, things seem quite all right for the travel industry.