AIR - Air NZ.

[winner69]

Why $3 will never be a sustainable price for AIR

Insight 1: The top 10 or so shareholders are the ones who influence medium to long term price movements. Traders create the short term noise - the day to day ups and downs.

Insight 2: In the NBR article somebody posted last week it mentioned one analyst who pointed out that airlines are a volatile industry where share price appreciation was relatively rare - and suggesting you couldn't begrudge anybody (including management) selling out when the price appears to be at a cyclical high. Those that do so have an appreciation of how cyclical stocks (esp airlines) behave

Insight 3: While walking around Lake Hayes the other day had a chat with a retired fund manager. He made the point that when the government sold a lot at $1.65 the price was probably a bit on the light side but not by much. He went on to say that Air NZ future strategy and plans were well known at that time and these were implicitly priced in to the $1.65 they got. All thats changed since is cheaper fuel which has lead to more competition but net net positive for Air NZ, but not a long term positive meaning that about $1.80 to $2.00 is about the 'right price' today.
He knew of some funds/instos who bought at the $1.65 and have cashed in at the high recent prices. His sage advice was 'winner, airline stocks can be very rewarding but only buy at the bottom of the inevitable cycle and never never buy near the top' (short term trading doesn't count)

So 1 and 2 and 3 together says that AIr NZ share price is heading down to a cyclical low over the next year or so but short term 'traders' will create some dips and spikes upward (we may even see $3 again). It does seem that airline stocks are a different beast than other stocks and medium to long term the price is driven by the sentiment of the larger shareholders (government excluded)

I only been interested in airline stocks recently after ignoring them for decades. I now see why not a good long term investment .....but heck you can have fun doing short term trading (unless caught out holding the day the plane crashes)77

Always interesting to look back on past posts (this one from May).....even if only to remind oneself that AIR is only good for trading .......seeing dividend stripping is a bit dodgy

[BlackPeter]

And while we are looking into past posts:

4-Aug-16:

...
Wouldn't be surprised if the SP holds (or lightly rises) until the dividend is declared ... and steeply drops after it goes ex dividend.

Anyway - I will keep them on the long-term watchlist ... I am sure, there will be times I see them again as BUY, but not now. Much more attractive below $1.50 or thereabouts ...

Discl: not holding;

obviously: DYOR - my crystal ball is cloudy!

4-Aug-16

BP there's bargin hunting and fire sale hunting, methinks your in the latter category, but you have to be optimistic, right. Your crystal ball seems cloudier than a mountain white out.

Looks like my crystal ball was spot on

More interesting question is - what can we learn from the hyped up threads on ST - may this be DIL (at some stage), PEB (at some stage), or more recently AIR?

1) Nobody is always right, no matter what their reputation (and yes, this does include myself)

2) Its easy to recognise hyped up threads ... that's the threads where a handful of posters (often overexposed to the particular stock) keep repeating the same hype over and over again. In addition to that do they start to put negative attributes on posters who dare to have a different (less hyped up) view of their beloved stock. I am referring to attributes like "nay-sayers", "scaremongerers", "haters". While it is unpleasant to be called this way ... these attributes are useful "red flags" for every investor. If you see them repeatedly used in a thread it is normally a great idea to avoid the respective stock.

... and back to AIR:

3) "cyclical means cyclical" (thanks Theresa): If you have a cyclical stock for which all stars aligned in a particular year and where the share price did rise well above any prior peak ... than it is quite likely that it will go down from here. If it is already in a confirmed downtrend (nice head and shoulders) and the fundamentals point to increasing competition and dwindling margins, than it is unreasonable to assume that paying out a huge dividend (which in parts was just a capital return based on a loss making deal and is in anyone's books just a big cash outflow anyway) is going to pop up the share price after going X-dividend.

4) Ah - yes ... it is a quite common folly to buy stocks based on dividend promises. While we don't know yet, whether AIR will be in a position to keep its promise (and for how long) of a minimum dividend of 20 cents p.a., the markets seem to be doubtful, and I think they have a point. Nobody (and I mean NOBODY) has a clue how the aviation market looks like in 6 or 12 months from now. How much worth is a promise which can only be kept if the market treats AIR nicely? Which means ... yes, if they keep their promise, than AIR will provide a great investment income. The question is just ... how likely is it that they will be able to keep their promise?

Just to clarify ... I think that AIR is one of the better airlines (though in my view not the best, whatever this means). I expect them to stay around (and I can't say the same about all their competitors), unless they keep repeating their past mistakes ... but two times burnt should be enough - shouldn't it?

I could well imagine to buy at some stage back in again, but not yet. The thing with market cycles is ... you normally need to see blood on the floor before things start to improve again. I expect margins in the aviation industry to keep dropping for some time - and this only will stop if some carriers can't stand the pressure anymore. Only when carriers start to drop out of the market do the survivors have a chance to increase margins and profitability again ...

DYOR.

[Joshuatree]

Maybe a Thread for "Trading Stock's ", only would be good and transparent and informing for all?. But then with the NZX such a small market with frequent liquidity probs with many stocks that may defeat the purpose of trading. Not of course in the larger frequently traded stocks like AIR but it would provide clarity re where folks are coming from and leave no questions of possible agendas or motives. If there is any int someone could start a trading thread for NZ stocks and one for ASX stocks.

Over 300 threads on AIR arguably the most discussed stock on here so are many of the posts from traders, short term investors? Then another question arises.Is long term investing now redundant on all but a few stocks?

[BlackPeter]

Maybe a Thread for "Trading Stock's ", only would be good and transparent and informing for all?. But then with the NZX such a small market with frequent liquidity probs with many stocks that may defeat the purpose of trading. Not of course in the larger frequently traded stocks like AIR but it would provide clarity re where folks are coming from and leave no questions of possible agendas or motives. If there is any int someone could start a trading thread for NZ stocks and one for ASX stocks.

Over 300 threads on AIR arguably the most discussed stock on here so are many of the posts from traders, short term investors? Then another question arises.Is long term investing now redundant on all but a few stocks?

Not sure I understand what you are asking for? Traders and investors talk about the same thing, they just have different time horizons. However - no matter whether you are a trader or an investor ... it is always beneficial to buy cheap and to sell dear.

Or do you mean that hype should be limited to traders-only threads with investor-only threads being used to have the serious conversations? I think this would miss the point of creating the hype in the first place. Sure - there might be some inexperienced traders who are just "whistling in the dark", but I think most of the more experienced traders just want to influence their audience to push the SP up ... for obvious reasons. What would be the point if only other traders would read this stuff?

[Snow Leopard]

Taking the 3 'local' airline stocks and comparing their current share price to consensus analyst value from 4-traders and we have:

AIR: $2.20; $1.82; 17.3% discount.

QAN: $4.07; $3.23; 20.6% discount*

VAH: $0.29; $0.24; 17.3% discount

*I have taken the liberty of chucking out a $8 valuation for QAN - otherwise $4.35.

So maybe this is where the AIR share price should be..

Best Wishes
Paper Tiger

[skid]

And while we are looking into past posts:

4-Aug-16:


4-Aug-16


Looks like my crystal ball was spot on

More interesting question is - what can we learn from the hyped up threads on ST - may this be DIL (at some stage), PEB (at some stage), or more recently AIR?

1) Nobody is always right, no matter what their reputation (and yes, this does include myself)

2) Its easy to recognise hyped up threads ... that's the threads where a handful of posters (often overexposed to the particular stock) keep repeating the same hype over and over again. In addition to that do they start to put negative attributes on posters who dare to have a different (less hyped up) view of their beloved stock. I am referring to attributes like "nay-sayers", "scaremongerers", "haters". While it is unpleasant to be called this way ... these attributes are useful "red flags" for every investor. If you see them repeatedly used in a thread it is normally a great idea to avoid the respective stock.

... and back to AIR:

3) "cyclical means cyclical" (thanks Theresa): If you have a cyclical stock for which all stars aligned in a particular year and where the share price did rise well above any prior peak ... than it is quite likely that it will go down from here. If it is already in a confirmed downtrend (nice head and shoulders) and the fundamentals point to increasing competition and dwindling margins, than it is unreasonable to assume that paying out a huge dividend (which in parts was just a capital return based on a loss making deal and is in anyone's books just a big cash outflow anyway) is going to pop up the share price after going X-dividend.

4) Ah - yes ... it is a quite common folly to buy stocks based on dividend promises. While we don't know yet, whether AIR will be in a position to keep its promise (and for how long) of a minimum dividend of 20 cents p.a., the markets seem to be doubtful, and I think they have a point. Nobody (and I mean NOBODY) has a clue how the aviation market looks like in 6 or 12 months from now. How much worth is a promise which can only be kept if the market treats AIR nicely? Which means ... yes, if they keep their promise, than AIR will provide a great investment income. The question is just ... how likely is it that they will be able to keep their promise?

Just to clarify ... I think that AIR is one of the better airlines (though in my view not the best, whatever this means). I expect them to stay around (and I can't say the same about all their competitors), unless they keep repeating their past mistakes ... but two times burnt should be enough - shouldn't it?

I could well imagine to buy at some stage back in again, but not yet. The thing with market cycles is ... you normally need to see blood on the floor before things start to improve again. I expect margins in the aviation industry to keep dropping for some time - and this only will stop if some carriers can't stand the pressure anymore. Only when carriers start to drop out of the market do the survivors have a chance to increase margins and profitability again ...

DYOR.

....good thoughts to pounder.. BP

I found it interesting ,if not relevant,that the downward slide for both PEB and AIR came after the Management sold a fair amount of shares. Im certainly not saying its, in any form ,the only reason,but just one more thing to put in the over shoulder computer.
All three companies certainly had their day as the flavor of the year on ST--(which I guess means emotional attachment)
I certainly learned alot from the DIL thread,way back then (when Moosey went out for his long walk after repeated warnings about the share from TA folks)--the beauty of these threads is that you can go back and read the entire thing and learn (unless some delete all their posts,which is a shame (to put it diplomatically) Hell,we all have egos...Sages sit and meditate for years to try to get that unbridled beast under control and appear to be happier for it.
Of course AIR will continue to run as a functional company--It appears to be more a matter of relativity.(with a dose of investor sentiment) We all know how easy it is to get that sentiment wrong...Thats between us and the market.
The amount we invest in one share is probably more between us and ourselves.

Aint nothin wrong with taking a ST break--sometimes just mowing the lawn or doing something like a days work that gets me outside my head helps heaps for me. (like Moosies walk,regardles of what he decided in the end)

But there shouldnt be anything standing in the way of coming back either...no body OWNS the fall in the SP..out of us,anyway....we're just a bunch of average Joes (or Janes)trying to think our way through the maize--hopefully we learn in the process.

[Snow Leopard]

Across the cycle sort of thing, so one can discuss short-term variations.

In order to maintain a $0.20 pa dividend and otherwise stay still, then AIR need to average minimum after tax profits of about $290M [$400M npbt] +inflation increments per annum.

Best Wishes
Paper Tiger

Disc: No AIR, much FUR.

[BlackPeter]

Across the cycle sort of thing, so one can discuss short-term variations.

In order to maintain a $0.20 pa dividend and otherwise stay still, then AIR need to average minimum after tax profits of about $290M [$400M npbt] +inflation increments per annum.

Best Wishes
Paper Tiger

Disc: No AIR, much FUR.

... which would be equivalent to an EPS of 26 cents ...

Quite challenging goal considering that their average EPS over the last 7 years (that's how far back my spreadsheet happens to go) was only 19 cents pa.

This time it will be different?

Discl: No AIR, no FUR ;

[winner69]

Airlines are proving once again that they are in a commodities business - same product, same input costs, same planes and little differentiation.

The cheap fuel of late has lead to increased capacity, probably beyond demand.

Put all this together the intense competition results in tumbling airfares.t

I reckon boom profits this year for the likes of AIR (maybe a bit lower than forecast) but then heading back to where airlines usually are - not that profitable

AIR at $3 today - maybe as high as it will go

Hoop possibly is right in saying airlines are notoriously cyclical - mostly of their own making

Is now the top of this current cycle?

From last April

Hoop posted a lot about cyclicals back then - all good stuff it was

Airline industry is probably 'more cyclical' than others - brought on by their own behaviour as outlined above.

For once i will say 'this time is NOT different'

[Valuegrowth]

Yes Air lines are cyclical. Still some cyclical stocks should have demand as they have more legs in their cycles.

Reasonably positive outlook is expected in North American Airlines in 2017 as well and they can have the strongest price positioning. Lower oil and gas prices could reduce travel volume in countries such as Russia, the Middle East and Africa. There is a prediction about a strong hotel market in the UK in 2017. Latin American and Carrabin region also should see lower travel rates.

Asia Pacific region is looking at moderate growth in airfares and hotels in 2017. I believe Air NZ should be able to maintain sufficient passenger revenues to cover operating costs and generate profits. Selected Airlines, hotels and restaurants stocks in the USA and Asia Pacific region should outperform others in 2016/17. In addition, lower fuel prices should benefit both airlines and hotels.

Why not AIR NZ one of the safest Airlines in the world?

https://skift.com/2016/09/14/report-...rowth-in-2017/

Cheap Airfare Will Power Corporate Travel Growth in 2017 Says Report