Delta, FedEx, United: Five Transportation Stocks to Buy Now

#3 American Airlines Group Inc (NASDAQ:AAL)

– Number of Hedge Fund Shareholders (as of June 30): 56
– Total Value of Hedge Funds’ Holdings (as of June 30): $1.35 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 8.30%

American Airlines Group Inc (NASDAQ:AAL) is a value play. Shares currently trade at just 7.4-times forward earnings estimates, and the company is aggressively returning capital back to investors, with management having returned $1.7 billion in capital through share repurchases and dividends in the second quarter alone. American Airlines’ large capital investments last year and this year should help it in the long run too. Because it has one of the youngest fleets in the industry, American Airlines will have lower costs and more cash flow in the future for even more buybacks and dividends.

#2 United Continental Holdings Inc (NYSE:UAL)

– Number of Hedge Fund Shareholders (as of June 30): 57
– Total Value of Hedge Funds’ Holdings (as of June 30): $2.53 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 18.30%

Analysts at Imperial Capital are bullish on United Continental Holdings Inc (NYSE:UAL) due to the company’s many strengths, including an expected $2.8 billion in free cash flow generation in 2016, and the company’s recent hire of Andrew Levy as its CFO. Imperial Capital analyst Michael Derchin believes United shares will outperform and could achieve a price of $57 over the next 12 months, which is $10 above their current price. Hedge funds, on the other hand, were a little more circumspect in the second quarter. 57 funds that we track had a bullish position in United Continental Holdings Inc (NYSE:UAL) at the end of June, down by four funds from the end of the previous quarter.

#1 Delta Air Lines, Inc. (NYSE:DAL)

– Number of Hedge Fund Shareholders (as of June 30): 94
– Total Value of Hedge Funds’ Holdings (as of June 30): $4.66 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 16.60%

With 94 funds in our database reporting long positions in the airline as of the end of June, Delta Air Lines, Inc. (NYSE:DAL) is the smart money’s top transportation pick. Delta reported better-than-expected earnings for its second quarter, with EPS of $1.47 versus estimates of $1.42. Despite missing revenue estimates by $40 million, investors mainly took a bullish view of the earnings report due to Delta management’s guidance for a third quarter system capacity increase of just 1%-to-2% year-over-year. Lower capacity increases in the industry should increase passenger revenue per available seat mile and profits. Ross Margolies‘ Stelliam Investment hiked its stake in Delta by 33% during the second quarter, to 6.02 million shares, which ranked the stock as the fund’s favorite.

Disclosure: None