Yet more crashing (in stock price)

Discussion in 'American Airlines | AAdvantage' started by kansaskeith, Nov 17, 2011.  |  Print Topic

  1. kansaskeith

    kansaskeith Gold Member

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    Yikes! We're down to 1.65 a share now, as I see it lower than anytime in the past year, even including the latest bankruptcy rumors a few weeks ago. What is the market saying about the future of this airline company? (In the two days since the last mention I see on here -- a thread Titan26 had two days ago with an article that seemed to link this to pilot labor negotiations -- it has collapsed another 14 percent, in just two days). No, I am not a shareholder, but even as a customer this seems scary.
     
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  2. uggboy
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    uggboy Gold Member

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    The markets remind us that it is OK to squeeze employees and frequent fliers!;)
     
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  3. Randy Petersen
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    Randy Petersen Founder

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    The market can be a fickle place and that as always has some effect on the passengers. I'm not sure all the blame on this stock trend is on AA, certainly some of it is and while typically i have stayed out of investments in the industry i spend a lot of time in, I'm fairly bullish on AA's future though understanding of the risks and challenges it has ahead. For me, this is a market price i can't ignore an investment in. What I can't decide is this a hold or a turn. My good day-trader neighbor friend did OK by me when i suggested he get in for a quick turn at $1.83. Told me he wouldn't have to cash his social security checks for a few months!

    Something I've been looking in on is the somewhat hidden asset that AAdvantage is for AA. While they would not want to pull that trigger too soon, I think that the current president of AAdvantage has the kind of moxie that would work to spin off AAdvantage and carry that role to one of talking the talk on Wall Street. What I haven't figured out yet is what that might look like for an uptick of AA stock or will it just be reflected in the spin stock itself. Any thoughts on that from the more financial market knowledged members of milepoint?
     
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  4. kansaskeith

    kansaskeith Gold Member

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    Well, Randy, answering each of your 2 points:

    On the first, interesting you should mention possibly buying at this distressed level. In retirement I normally invest in income-producing stuff (dividends) rather than for appreciation, and going way back to the CrAAndall days, AMR has said it doesn't believe in dividends. So normally a volatile stock with no divvy would not even be on my radar. But in the hour since I posted that, I said to myself, "gee, this is so low it is nuts, would it really hurt to buy 1,000 shares in a gamble?" And then I read YOUR post. Do great minds think alike, hehheh? Market still open today. We'll see - but if I do it will be for a relatively quick turn. Too volatile for a sit-and-hold for me.

    As to your second point I recall considerable discussion of spinning off AAdvantage, and now, to boot, most of us agree that Mrs. Leibman is impressive (though if I recall she came out of I.T., not finance). However, I am not enough of a wizard to know what such a spinoff would do to the value of the corporation.

    EDIT: After I typed the above I put in a "buy" day order, all or none, for 1,000 shares at 1.70. By that point, though, it was up to 1.72 and didn't get down low enough for the order to execute before the market closed. In after-hours trade, AMR is WAY down (1.61 - wow!) but at this point I have frigid feet so didn't buy in after-hours either, and will probably think this through again in the morning.
     
  5. dhammer53
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    dhammer53 Gold Member

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    The price is $1.81.

    I'm investing in Randy, not AA. :cool:
     
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  6. tom911
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    tom911 Gold Member

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    Didn't Air Canada do something like that? What was the impact on frequent flyers? Did award charts and availability remain the same or change after the spinoff?
     
  7. cvsara
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    cvsara Gold Member

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    Bullish, on an American company? OF COURSE! I haven't been following the AMR stock, but at $1.83 or so, a $1,800 investment might just yield a good return in a year or so. Remember, they did stick it out when the other big ORD player filed bankruptcy. I played the game a few years ago when F hung in there when GM and Chrysler threw in the towel. Ford was near a dollar, but didn't fold. When it got to $2 a 1000 shares didn't look bad at all, to me. It closed Friday at $10.26, down from its past year high of near $19. An American company that isn't going to fold, (IMO). A nice tidy profit, if I sold my 1000 shares Monday, but I think I'll stick it out. So a couple bucks on another American icon might just be in order. Thanks for the help Randy. I'm sure we are both hoping you're right. Along with quite a few others here.
    Stay tuned.
     
  8. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    So Delta, US Air, Continental, United, PanAm, TWA, Eastern, .... GM, Chrysler, Lehman, ... were not American companies when they filed for bankruptcy? ;)

    Maybe I am old-fashioned, but I'd look at the fundamentals for investment decisions... (and I haven't done that for AA, so I have no opinion on their future).
     
  9. cvsara
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    cvsara Gold Member

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    Yes they are, and I think I singled out UA. and GM as a bankrupt. It does happen> Chrysler was a Diamler (Did I spell that right?) was a German Company in the US with Chrysler, if I remember correctly. Just saying that Ford was one that seems to have made it back. I'm betting AMR will too. And if they don't, a thousand shares at $2 each still has value, in that it can be used as a write off against other winners. IBM, CAT, APPL, those American Companies. And quite a few more.
     
  10. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    Nope. Daimler.

    I think you mean AAPL.

    To me a lot of these companies are global companies that happen to have their headquarters in the US. "Designed in California, Made in China, Sold Globally".

    But back on topic (of airlines) -- what makes AA different from UA, CO, ... (all the ones I listed that filed for Ch.11 once or twice in their recent history)? And don't get me wrong, I am really interested in the answer, I am not asking because I disagree with it.
     
  11. kansaskeith

    kansaskeith Gold Member

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    The answer is that AA is the one that was able to arrange its affairs so that it wasn't insolvent, and the others were not. Oversimplifying, I am sure: if you aren't insolvent you aren't bankrupt, and AA wasn't.

    The others didn't force (at least as much) their workers to make concessions pre-bankruptcy, just said 'look, we have more liabilities and costs than we have worth, we're bankrupt.' Then the courts rearranged things so they were solvent again. Most of us believe (but the AA flight attendants might argue this) the results were that the courts cut labor costs for those other airlines far further than what AA was able to arrange voluntarily with its workers. This means the other airlines' fundamentals are stronger now largely because of lower labor costs in today's market.

    I still gunch a bit at the thought that a business can, at will, just go into bankruptcy to cut its labor costs, though certainly a lot of airline managers who went that route made it look that way. I still think a company needs to be insolvent before the bankruptcy laws of our nation should apply. Obviously it becomes a judgement call as to where insolvency cuts in. I hope AA/AMR doesn't declare, but it very well might.

    As for your earlier question on fundamentals to drive our investment decisions: with its higher cost structure I would think AMR would pick up a lot of demerits in the screening process, reviewing fundamentals, on what stock to buy. The question is, even with all the demerits, is an iconic American institution worth a gamble of 1,000 shares at $1.80. I tried to buy a thousand Thursday afternoon at $1.71, didn't get them, and now am getting cold feet at $1.80! :)
     
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  12. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    I try not to get carried away with monikers like "iconic American institution" -- look at the list of those I listed above that went to bankruptcy court (and some of them didn't come back). I suspect the bankers and money managers who have a much bigger influence on the direction of the stock price don't look at it as something iconic. It's just a ticket symbol to them.

    Yes, there is little downside when you buy a thousand shares at $1.71. Doesn't mean that there is a lot of upside, though.
     
  13. kansaskeith

    kansaskeith Gold Member

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    Well, it's hovering between $.25 and $.27 per share as I type this, after the Chapter-11 announcement. Glad my buy order of 1,000 shares at $1.71 didn't go through back on Nov. 17. :)

    I have a new nominee for "iconic American institution:" Bankruptcy Court.
     

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