On Friday, I announced that I added American Airlines Group Inc (NASDAQ: AAL) to my investing portfolio. While the average analyst rating is a sell, I saw a huge opportunity, which led me to sell 50% of my holdings in other companies and dedicate that 50% of my portfolio to AAL stock.
It looks like that move was a great one. Here’s why I decided to buy AAL, and why I’m expecting to hold the stock until at least mid-next year!
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Why I Added AAL Stock To My Portfolio
As mentioned above, I made a bold move on Friday, selling 50% of my holdings and allocating half of my investing portfolio to American Airlines stock. Many saw the move and sent emails explaining why I was going to lose my rear end. 45% of analysts rate the stock a sell with the majority of the rest rating it a hold, and only ver few rating it a buy.
Why would I make such a risky move? There are a few reasons:
A COVID-19 Vaccine Is Coming
For months now, I’ve been explaining to family and close freinds that as soon as there was any indication that a COVID-19 vaccine was around the corner, I would be buying both AAL stock (currently representing 50% of my portfolio) as well as other stocks in travel.
The reason is simple.
Consumers across the United States have been stuck in their homes. Even after the United States started to reopen its economy consumers weren’t OK with flying. After all, fear of getting infected while packed in to a flying metal tube with hundreds of people you don’t know just isn’t appealing. However, this means that many gave up their 2020 vacations, and are itching to get out.
That bodes well for American Airlines stock.
With a vaccine around the corner, demand for travel will likely skyrocket. However, consumers are broke. The COVID-19 pandemic has devastated the United States economy, which is another reason I’m in love with AAL stock.
American Airlines is a discount air-travel provider, offering some of the lowest prices found in the United States. As consumers look for travel opportunities when a vaccine becomes available, they’ll be looking for low-cost opportunities to go on vacations. American Airline’s discount model will likely catch the attention of this vast audience.
Even before the COVID-19 pandemic, American Airlines experienced a decline in revenue and earnings, resulting in declines in its stock price. When the pandemic hit. Those declines were exacerbated, with the stock falling well over 50% year-to-date.
Nonetheless, much of these declines were the result of COVID-19. Sure, it’s a scary concept, but COVID-19 is not a long-term issue. With vaccines around the corner, it’s likely going to be a thing of the past in the next 12 to 18 months.
As we begin to see a big boom in travel, investors are going to see increasing revenue and earnings, setting the stage for dramatic growth ahead.
Time To Refoucs
The COVID-19 pandemic is a painful reality for all, but it may be a reverse Trojan Horse for American Airlines. The fact of the matter is that revenue and earnings declines were the result of reductions in demand for its flights. There’s a reason for that!
While I’m not exactly sure why consumers were choosing competitors over American Airlines, I’m sure the company does. The past several months has given the company time to shift its focus in order to solve the issues it has been facing that have caused many to fly with other carriers.
As the world gets back to normal, we’re likely to see compelling advertisements out of AAL, looking to capture the share of the market it lost pre-pandemic, leading to even more opportunity in terms of sales growth.
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I’m Glad I Made The Call
The fact of the matter is that all the stars are aligning for American Airlines at the moment, and it’s management team isn’t one that’s known for passing up on major opportunities. Therefore, as a vaccine becomes widely available and consumers begin to travel, I’m expecting to see significant growth in revenue, earnings, and ultimately, stock price at AAL.
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