Article from Air Transport World. Discuss
http://atwonline.com/blog/doug-parker-our-stock-so-undervalued-it-defies-logic
http://atwonline.com/blog/doug-parker-our-stock-so-undervalued-it-defies-logic
"Our stock is so undervalued it defies logic."--Doug Parker
- Thread starter jimntx
- Start date
He's probably correct, but why not quietly know that you're right instead of constantly going on "tirades" to the media about it?
High stock prices don't benefit anyone except someone who is about to sell, so enjoy the low (relatively) low stock prices while you have them.
The economist quoted in the article is correct; it's going to take a lot more time before investors believe the airlines when they claim that they've finally "learned their lessons and that stable high earnings are here to stay." Investors have long memories, and AA's history includes four bankruptcies in the past 25 years (HP, US (twice) and AA). In only one of those were shareholders not wiped out (AA's Ch 11 in 2011). Every other long-time major airline not named Southwest has filed for Ch 11 at least once.
Low stock prices are great for management because it allows AA to buy back stock in the open market for less than management thinks it is worth. That concentrates future earnings in the hands of the remaining shares, which is a good thing. I've got shareholder letters from Warren Buffett going back 40 years and more than once he has said the same thing.
The final point is growth. Investors bid up the price of stock of companies where earnings are growing. If AA does indeed produce an average of $5 billion over the long term, that's far different than a company where earnings grow by 15% or 20% or 25% year after year (like most successful tech companies). A lifetime of stable $5 billion a year has a known present value that isn't as impressive as the stock price history of Microsoft, Apple, Google, Facebook, Amazon, Oracle, etc. where earnings grew like gangbusters. Sorry, Parker, you're just the CEO of an airline begun by E L Cord more than 85 years ago. You aren't the CEO of the greatest thing ever, and your stock price will likely always reflect that.
High stock prices don't benefit anyone except someone who is about to sell, so enjoy the low (relatively) low stock prices while you have them.
The economist quoted in the article is correct; it's going to take a lot more time before investors believe the airlines when they claim that they've finally "learned their lessons and that stable high earnings are here to stay." Investors have long memories, and AA's history includes four bankruptcies in the past 25 years (HP, US (twice) and AA). In only one of those were shareholders not wiped out (AA's Ch 11 in 2011). Every other long-time major airline not named Southwest has filed for Ch 11 at least once.
Low stock prices are great for management because it allows AA to buy back stock in the open market for less than management thinks it is worth. That concentrates future earnings in the hands of the remaining shares, which is a good thing. I've got shareholder letters from Warren Buffett going back 40 years and more than once he has said the same thing.
The final point is growth. Investors bid up the price of stock of companies where earnings are growing. If AA does indeed produce an average of $5 billion over the long term, that's far different than a company where earnings grow by 15% or 20% or 25% year after year (like most successful tech companies). A lifetime of stable $5 billion a year has a known present value that isn't as impressive as the stock price history of Microsoft, Apple, Google, Facebook, Amazon, Oracle, etc. where earnings grew like gangbusters. Sorry, Parker, you're just the CEO of an airline begun by E L Cord more than 85 years ago. You aren't the CEO of the greatest thing ever, and your stock price will likely always reflect that.
- Thread Starter
- #3
Now FWAAA, don't you think those last two sentences are a bit harsh? You may hurt his feelings.
AA89
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That would include Doug Parker and his gang who regularly sell shares. They probably view the low stock price=compensation the same way that other lowly AA employees view their compensation as lower than other airlines. Just his way of bitching about it.
La Li Lu Le Lo
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WeAAsles
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The Oracle of Omaha strikes again.
Warren Buffett's Berkshire Hathaway Inc (BRKa.N) on Monday said it added to its sizable investments in American Airlines Group Inc (AAL.O) and Southwest Airlines Co (LUV.N), and shed its stake in Twenty-First Century Fox Inc (FOXA.O).
In a regulatory filing, Berkshire said that in the first quarter its American stake grew 8 percent to 49.3 million shares worth $2.08 billion, while its Southwest stake grew 10 percent to 47.7 million shares worth $2.57 billion.
Berkshire also shed 8 percent of its holdings in Delta Air Lines Inc (DAL.N), ending March with 55 million shares worth $2.53 billion.
http://mobile.reuters.com/article/idUSKCN18B2LH
Warren Buffett's Berkshire Hathaway Inc (BRKa.N) on Monday said it added to its sizable investments in American Airlines Group Inc (AAL.O) and Southwest Airlines Co (LUV.N), and shed its stake in Twenty-First Century Fox Inc (FOXA.O).
In a regulatory filing, Berkshire said that in the first quarter its American stake grew 8 percent to 49.3 million shares worth $2.08 billion, while its Southwest stake grew 10 percent to 47.7 million shares worth $2.57 billion.
Berkshire also shed 8 percent of its holdings in Delta Air Lines Inc (DAL.N), ending March with 55 million shares worth $2.53 billion.
http://mobile.reuters.com/article/idUSKCN18B2LH
- Thread Starter
- #7
Too bad someone extremely pro-DL is not here anymore to explain how Warren has obviously lost his marbles if he's buying American and selling Delta.
WeAAsles
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Too bad someone extremely pro-DL is not here anymore to explain how Warren has obviously lost his marbles if he's buying American and selling Delta.
Could you imagine that old kook sitting in a room with Warren one on one arguing against that Stock move? LMFAO.
USAir plans stock buyback Carrier also will retire debt, redeem preferred shares
Transportation
February 04, 1998|By Suzanne Wooton | Suzanne Wooton,SUN STAFF
In a sweeping plan aimed at increasing the value of its stock, US Airways Group Inc. said yesterday that it will repurchase up to $500 million in common stock, retire a sizable amount of debt and redeem the last of its outstanding preferred shares.
"With approximately $2 billion in cash on hand, we are now in a position to take steps to underscore our focus on both shareholder value and improving our balance sheet," US Airways Chairman Stephen M. Wolf said yesterday.
After years of devastating losses, the airline, along with the rest of the industry, has enjoyed a resurgence during the past two years and is now posting record profits. In the fourth quarter of 1997, US Airways, the dominant carrier at Baltimore-Washington International Airport, earned $137.5 million, quintuple the amount the same period a year earlier.
Transportation
February 04, 1998|By Suzanne Wooton | Suzanne Wooton,SUN STAFF
In a sweeping plan aimed at increasing the value of its stock, US Airways Group Inc. said yesterday that it will repurchase up to $500 million in common stock, retire a sizable amount of debt and redeem the last of its outstanding preferred shares.
"With approximately $2 billion in cash on hand, we are now in a position to take steps to underscore our focus on both shareholder value and improving our balance sheet," US Airways Chairman Stephen M. Wolf said yesterday.
After years of devastating losses, the airline, along with the rest of the industry, has enjoyed a resurgence during the past two years and is now posting record profits. In the fourth quarter of 1997, US Airways, the dominant carrier at Baltimore-Washington International Airport, earned $137.5 million, quintuple the amount the same period a year earlier.
Al Legheny
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Jester
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This industry is so operationally leveraged (percentage of fixed costs vs. total costs) that even a small downturn and decreased loads will create large financial losses. Wall Street has not forgotten the math while the Fort Worth boys continue to tout how the industry has changed with only 4 major players in the domestic side, thus more "market discipline" to avoid out-of-control fare wars during tougher times.
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