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.