In this article we discuss the 12 best airline stocks to invest in right now.
Airline stocks that took a battering for the best part of last year because of the COVID-19 crisis have slowly started to bounce back as the vaccinations allow for the gradual reopening of the economy and the increase in domestic and international travel. The International Air Transport Association (IATA), a Geneva-based trade body, expects that the airline industry will narrow down annual losses to $47 billion in 2021 compared to losses of over $126 billion in 2020. According to IATA, regions with large domestic markets are expected to lead this growth.
In a report released in April, the trade body underlined that a surge in virus cases and vaccine delays at the beginning of the year had impacted the airline industry. IATA thus revised 2021 growth forecasts in terms of global revenue passenger kilometers to 26% in 2021 compared to 2020. It also highlighted that cargo remained a strong business for the sector and was becoming more important to global trade, with cargo ton kilometres growing at more than 13% compared to the forecast growth of trade, per World Trade Organization, that stood at 8%.
Investors should take advantage of these growth opportunities in the airline sector in the coming weeks. Some of the best airline stocks in this context are Southwest Airlines Co. (NYSE: LUV), Delta Air Lines, Inc. (NYSE: DAL), and Alaska Air Group, Inc. (NYSE: ALK), among others discussed in detail below. According to Research and Markets, the global air transport market is expected to grow from $460 billion in 2020 to $657 billion in 2025 at a compound annual growth rate of 6%, factoring in the impact of the virus crisis.
The uncertainty in the market in relation to the spread of new virus variants has hit investor interest around airline stocks and left market experts scratching their heads. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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Our Methodology
With this context in mind, here is our list of the 12 best airline stocks to invest in right now. We chose these stocks based on their popularity among the 866 hedge funds tracked by Insider Monkey. We also took into account analyst ratings, future growth potential and fundamentals in our criteria. We ranked these stocks based on the number of hedge funds having stakes in each.
Best Airline Stocks To Invest In Right Now
12. Azul S.A. (NYSE: AZUL)
Number of Hedge Fund Holders: 11
Azul S.A. (NYSE: AZUL) is a Brazilian firm that markets passenger and cargo air transport services. It is placed twelfth on our list of 12 best airline stocks to invest in right now. The firm has a fleet of 162 aircraft that travel to more than 112 destinations around the world. On June 14, the company reported that passenger traffic in May had risen 361% year-on-year to 1.5 billion revenue passenger kilometres. Domestic traffic was up 435% year-on-year while international traffic was up 14% year-on-year in May.
On July 15, investment advisory Deutsche Bank maintained a Buy rating on Azul S.A. (NYSE: AZUL) stock and raised the price target to $30 from $25, noting that there was a pickup in travel demand in key Latin American markets that would benefit the firm.
At the end of the first quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $69 million in Azul S.A. (NYSE: AZUL), down from 17 the preceding quarter worth $160 million.
11. Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE: VLRS)
Number of Hedge Fund Holders: 14
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE: VLRS) is ranked eleventh on our list of 12 best airline stocks to invest in right now. The firm is based in Mexico and provides air transport services. It has a fleet of 86 aircraft that fly to 68 destinations, mostly in the Americas. In earnings results for the second quarter, posted on July 15, the firm reported a revenue of Ps11.5 billion, up 38% compared to the revenue over the same period last year. The earnings per share were Ps1.32.
On July 21, investment advisory Citi raised the price target on Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE: VLRS) stock to $31 from $27 and reiterated a Buy rating, underlining that the stock was one of the airline favorites of the advisory in the region.
At the end of the first quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $172.9 million in Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE: VLRS), down from 19 in the preceding quarter worth $172.5 million.
10. Ryanair Holdings plc (NASDAQ: RYAAY)
Number of Hedge Fund Holders: 14
Ryanair Holdings plc (NASDAQ: RYAAY) is an Irish firm that provides airline services. It is placed tenth on our list of 12 best airline stocks to invest in right now. It has a fleet of 451 aircraft that travel to more than 210 airports, mostly within the European Union. In earnings results for the first quarter, posted on July 26, the firm reported earnings per share -€0.24. The revenue over the period was €370 million, up close to 196% compared to the revenue over the same period last year.
On July 27, investment advisory Redburn upgraded Ryanair Holdings plc (NASDAQ: RYAAY) stock to Buy from Neutral and highlighted that the firm was continuing to be seen as one of the winners on the other side of the crisis.
At the end of the first quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $568 million in Ryanair Holdings plc (NASDAQ: RYAAY), down from 23 the preceding quarter worth $782 million.
Just like Southwest Airlines Co. (NYSE: LUV), Delta Air Lines, Inc. (NYSE: DAL), and Alaska Air Group, Inc. (NYSE: ALK), Ryanair Holdings plc (NASDAQ: RYAAY) is one of the best airline stocks to invest in right now.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Ryanair Holdings plc (NASDAQ: RYAAY) was one of them. Here is what the fund said:
“Our top Q4 contributor was Ryanair Holdings, a low-cost European airline. The positive vaccine-related news caused Ryanair and other travel and leisure stocks to rally sharply as markets looked ahead to travel demand’s recovery in 2021. We continue to like Ryanair’s leading market position, low cost base and history of returning capital to shareholders.”
9. Hawaiian Holdings, Inc. (NASDAQ: HA)
Number of hedge fund holders: 16
Hawaiian Holdings, Inc. (NASDAQ: HA) is ranked ninth on our list of 12 best airline stocks to invest in right now. The firm operates from Hawaii and markets scheduled air transportation services. The firm was founded in 1929 and has a fleet of 61 aircraft. On July 27, the firm posted earnings for the second quarter, reporting earnings per share of -$1.44, beating market estimates by $0.44. The revenue over the period was $410 million, up 584% compared to the revenue over the same period last year.
In late April, investment advisory Wolfe Research upgraded Hawaiian Holdings, Inc. (NASDAQ: HA) stock to Outperform from Peer Perform with a price target of $32, citing valuation following the first quarter earnings report of the firm.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in Hawaiian Holdings, Inc. (NASDAQ: HA) with 1.3 million shares worth more than $36 million.
Alongside Southwest Airlines Co. (NYSE: LUV), Delta Air Lines, Inc. (NYSE: DAL), and Alaska Air Group, Inc. (NYSE: ALK), Hawaiian Holdings, Inc. (NASDAQ: HA) is one of the best airline stocks to invest in right now.
8. Copa Holdings, S.A. (NYSE: CPA)
Number of Hedge Fund Holders: 18
Copa Holdings, S.A. (NYSE: CPA) is a Panama-based firm that provides airline passenger and cargo services. It is placed eighth on our list of 12 best airline stocks to invest in right now. The firm has a fleet of 77 aircraft that travel to 54 destinations around the world. The firm posted earnings for the second quarter on August 4, reporting earnings per share of -$0.38, beating market estimates by $0.82. The revenue over the period was $304 million, beating estimates by close to $44 million.
On June 17, investment advisory Seaport Global upgraded Copa Holdings, S.A. (NYSE: CPA) stock to Buy from Neutral with a price target of $98. Daniel McKenzie, an analyst at the firm, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Copa Holdings, S.A. (NYSE: CPA) with 531,228 shares worth more than $42 million.
In addition to Southwest Airlines Co. (NYSE: LUV), Delta Air Lines, Inc. (NYSE: DAL), and Alaska Air Group, Inc. (NYSE: ALK), Copa Holdings, S.A. (NYSE: CPA) is one of the best airline stocks to invest in right now.
7. Mesa Air Group, Inc. (NASDAQ: MESA)
Number of Hedge Fund Holders: 20
Mesa Air Group, Inc. (NASDAQ: MESA) is ranked seventh on our list of 12 best airline stocks to invest in right now. The company operates from Arizona and markets airline services under capacity agreements. It has a fleet of 146 aircraft that travel to 102 cities across the United States and Mexico. On August 9, the firm posted earnings for the third fiscal quarter, reporting earnings per share of $0.11, in line with market estimates. The revenue over the period was $125 million, up 71% year-on-year.
On May 11, investment advisory Deutsche Bank upgraded Mesa Air Group, Inc. (NASDAQ: MESA) stock to Buy from Hold with a price target of $15, noting that the earnings for the second quarter for the firm pointed to a profitable 2021.
At the end of the first quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $69 million in Mesa Air Group, Inc. (NASDAQ: MESA), up from 14 the preceding quarter worth $48 million.
Southwest Airlines Co. (NYSE: LUV), Delta Air Lines, Inc. (NYSE: DAL), and Alaska Air Group, Inc. (NYSE: ALK) are some of the best airline stocks to invest in right now, in addition to Mesa Air Group, Inc. (NASDAQ: MESA).
6. Spirit Airlines, Inc. (NYSE: SAVE)
Number of Hedge Fund Holders: 24
Spirit Airlines, Inc. (NYSE: SAVE) is a Florida-based firm that provides airline services. It is placed sixth on our list of 12 best airline stocks to invest in right now. The firm has a fleet of 157 aircraft that travel to 78 destinations around the world. On July 28, the firm posted earnings for the second quarter, reporting a revenue of more than $859 million, up over 520% compared to the revenue over the same period last year and beating market predictions by close to $42 million. The firm has a market cap of over $2.8 billion.
On June 15, investment advisory Citi upgraded Spirit Airlines, Inc. (NYSE: SAVE) stock to Buy from Neutral and raised the price target to $42 from $40, appreciating solid updates to the business in the second quarter.
Out of the hedge funds being tracked by Insider Monkey, Minneapolis-based investment firm Whitebox Advisors is a leading shareholder in Spirit Airlines, Inc. (NYSE: SAVE) with 35.7 million shares worth more than $109 million.
Southwest Airlines Co. (NYSE: LUV), Delta Air Lines, Inc. (NYSE: DAL), and Alaska Air Group, Inc. (NYSE: ALK) are some of the best airline stocks to invest in right now, alongside Spirit Airlines, Inc. (NYSE: SAVE).
5. JetBlue Airways Corporation (NASDAQ: JBLU)
Number of Hedge Fund Holders: 29
JetBlue Airways Corporation (NASDAQ: JBLU) is ranked fifth on our list of 12 best airline stocks to invest in right now. The company provides air passenger transport services and is based in New York. It operates a fleet of 267 aircraft that travel to 98 destinations, mostly in the Americas. On July 27, the firm posted earnings for the second quarter, reporting earnings per share of -$0.65, beating estimates by $0.09. The revenue over the period was $1.5 billion, up 587% year-on-year and beating estimates by $60 million.
On July 28, investment advisory Susquehanna kept a Positive rating on JetBlue Airways Corporation (NASDAQ: JBLU) stock but lowered the price target to $21 from $24, noting that there would be near-term pressure on the firm but long-term outlook seemed positive.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in JetBlue Airways Corporation (NASDAQ: JBLU) with 3.3 million shares worth more than $69 million.
4. Alaska Air Group, Inc. (NYSE: ALK)
Number of Hedge Fund Holders: 32
Alaska Air Group, Inc. (NYSE: ALK) is a Washington-based company that provides passenger and cargo air transport. It is placed fourth on our list of 12 best airline stocks to invest in right now. The company was founded in 1932 and flies to more than 110 destinations around the world. In earnings results for the second quarter, posted on July 22, the firm reported earnings per share of -$0.30, beating market estimates by $0.15. The revenue over the period was $1.5 billion, up 263% year-on-year.
On July 12, investment advisory Evercore maintained an Outperform rating on Alaska Air Group, Inc. (NYSE: ALK) stock and raised the price target to $30 from $25, identifying the firm as one of the top five picks in the airline sector.
At the end of the first quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $587 million in Alaska Air Group, Inc. (NYSE: ALK), down from 35 the preceding quarter worth $552 million.
In its Q1 2021 investor letter, White Brook Capital, an asset management firm, highlighted a few stocks and Alaska Air Group, Inc. (NYSE: ALK) was one of them. Here is what the fund said:
“Despite initiating a position in the fourth quarter, Alaska Airlines Group, Inc (ALK) was sold during the first quarter. The Alaska Airlines investment was envisioned to be a long-term investment, but the stock price appreciated more quickly than expected. Like many other “re-open trades”, the value of the company including its debt now exceeds the value pre-pandemic. For that to be reasonable I’d have to believe:
1) The company/industry had too little debt and by adding debt they’ve better optimized their balance sheet for equity returns while still maintaining downside resiliency;
2) The company/industry’s profitability will be better moving forward than it was pre-pandemic and therefore warrant a higher multiple; and/or
3) The company/industry was significantly mispriced before the pandemic.
The first was true of Alaska Airlines pre-pandemic, but the certainty one can have about the second and third is not high enough to compel continued investment at today’s prices. The intended long-term position turned into a short-term trade with an exceptional IRR.”
3. SkyWest, Inc. (NASDAQ: SKYW)
Number of Hedge Fund Holders: 33
SkyWest, Inc. (NASDAQ: SKYW) is ranked third on our list of 12 best airline stocks to invest in right now. The company provides airline services and is based in Utah. On July 29, the company posted earnings for the second quarter, reporting earnings per share of $1.22, beating market predictions by $1. The revenue over the period was more than $656 million, up 87% compared to the revenue over the same period last year and beating market predictions by more than $57 million.
In April, investment advisory Raymond James reiterated a Strong Buy rating on SkyWest, Inc. (NASDAQ: SKYW) stock and raised the price target to $66 from $56, underlining that the firm would use balance sheet strength in the near term to drive growth.
At the end of the first quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $765 million in SkyWest, Inc. (NASDAQ: SKYW), down from 41 the preceding quarter worth $763 million.
2. Delta Air Lines, Inc. (NYSE: DAL)
Number of Hedge Fund Holders: 50
Delta Air Lines, Inc. (NYSE: DAL) is a Georgia-based airline firm. It was founded in 1924 and is placed second on our list of 12 best airline stocks to invest in right now. It owns and operates a fleet of 1,110 aircraft. In earnings results for the second quarter, posted on July 14, the firm reported earnings per share of -$1.07, beating market estimates by $0.30. The revenue over the period was more than $7 billion, up 385% compared to the revenue over the same period last year and beating estimates by $850 million.
On July 15, investment advisory Raymond James upgraded Delta Air Lines, Inc. (NYSE: DAL) stock to Strong Buy from Market Perform with a price target of $58, noting that the expectations around the firm had been reset.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Delta Air Lines, Inc. (NYSE: DAL) with 4 million shares worth more than $195 million.
In its Q2 2020 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and Delta Air Lines, Inc. (NYSE: DAL) was one of them. Here is what the fund said:
“Delta Air Lines Inc. (DAL) declined -1.38% over the period after the initial hit to the stock in 1Q following the outbreak of the COVID-19 pandemic. The company reported 1Q results with EPS of -$0.51, in-line with consensus. The company guided for June revenue to be down 90% YoY and announced another $1B cut to capital expenditures (CAPEX) for a total cut of $3B so far this year. The company ended the quarter with $6B in liquidity and they expect to end the June quarter with $10B in liquidity. Delta held its annual shareholders’ meeting where it noted that it expects to finish the 2nd quarter with over $15B in liquidity with a daily cash burn of $30M getting to breakeven by the end of the year.”
1. Southwest Airlines Co. (NYSE: LUV)
Number of Hedge Fund Holders: 52
Southwest Airlines Co. (NYSE: LUV) is ranked first on our list of 12 best airline stocks to invest in right now. The company is based in Texas and markets passenger airline services. It has a fleet of 718 aircraft that travel to 107 destinations around the world. The firm posted earnings for the second quarter on July 22, reporting a revenue of over $4 billion, up 297% compared to the revenue over the same period last year and beating market predictions by $70 million. The company has a market cap of over $30 billion.
On July 26, investment advisory Jefferies maintained a Buy rating on Southwest Airlines Co. (NYSE: LUV) stock but lowered the price target to $65 from $75, noting the lower 2023 cash flow forecast for the firm. On August 11, Redburn started covering LUV stock with a Buy rating.
At the end of the fourth quarter of 2020, 52 hedge funds in the database of Insider Monkey held stakes worth $747 million in Southwest Airlines Co. (NYSE: LUV), down from 55 in the preceding quarter worth $757 million.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Southwest Airlines Co. (NYSE: LUV) was one of them. Here is what the fund said:
“One of our goals as we constantly monitor the portfolio is to see if we can better deploy capital by lowering the probability of being wrong. This motivation drove our swap of Delta Airlines into Southwest Airlines during the quarter. We expect a huge rebound in airline traffic as COVID-19 concerns abate, but we are much more comfortable that it will be led by leisure travel. Conversely, we are more uncertain of the ultimate level and timing of business travel demand. Southwest, with its simple fare strategy and high leisure travel exposure, is better positioned to capture the ongoing traffic rebound without having to answer the business travel demand question on which Delta is more dependent. As a result, we expect Southwest to play serious offense as it gains share in the rebounding travel market and can fully leverage the massive pent-up demand for travel that we expect. In addition, the U.S. lead in vaccination over Europe favors Southwest over Delta, given the domestic focus of Southwest. COVID-19 has changed many things, but humans by their very nature like to move, and many of them will do it on Southwest.”
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Disclose. None. 12 Best Airline Stocks To Invest In Right Now is originally published on Insider Monkey.
