Bill Miller Likes Buffett’s Timing On Airlines, Talks Valeant (VRX)’s Free Cash Flow, Amazon (AMZN)’s Fate Under Trump

Miller Is Bullish on Airlines

Bill Miller is bullish on airlines, including Delta Air Lines, Inc. (NYSE:DAL) Hawaiian Holdings, Inc. (NASDAQ:HA), and Alaska Air Group, Inc. (NYSE:ALK). He said that he has made five-times his money from his investments in Southwest Airlines Co (NYSE:LUV), American Airlines, United Continental Holdings, and Delta Air Lines, Inc. (NYSE:DAL), and said that airline stocks are still undervalued and have the potential for high yields. Airlines are a commodity business according to Miller, and the internal incentive structures of the industry are based on return on capital. Miller added that Delta Air Lines, Inc. (NYSE:DAL) has 15% free cash flow yield, and suggested that it could be double its current price if it were a high-yield bond. GDP and unit growth are two of the main catalysts for airline stocks according to Miller, who expects both to increase at a greater rate. He said that Hawaiian Holdings, Inc. (NASDAQ:HA) is more expensive compared to other players in the industry, whereas Alaska Air Group, Inc. (NYSE:ALK) is expensive due to the quality of its business.

Miller was also happy to see legendary investor Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) acquire airline stocks. Berkshire recently disclosed ownership of new stakes in American Airlines (NASDAQ:AAL), Delta Airlines (NYSE:DAL), and United Continental Holdings Inc. (NYSE:UAL). This is a departure from Warren Buffett’s long-held aversion to airline stocks. LMM also owned stakes in DAL, UAL, and AAL on September 30.

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