Well Rounded Investor

My journey of becoming financial independence by 35 years old

Recent Buy – AAL

What?!! American Airline (AAL)?

But isn’t that …

  1. People are fearful of terrorist attacks and Zika virus, so air travel to Europe, Africa, or South America and the Carribean are declining?
  2. Gas prices is cheap, but airlines are stuck with longterm deal with oil and gas company to buy for a higher fixed price, so they haven’t been able to capture more profit from the recent cheap gas price?
  3. More regulation from the NSA cause more delays, and cause less profit?
  4. Don’t you see the price of AAL drops from $47 this time last year to $27 today (-42%), after the Brexit vote?
  5. Don’t you see the price of AAL drops 9% today trading session?
  6. Don’t you see there will be a cascade of EU countries leaving the EU following Brexit? All the gurus are predicting lower stocks in the next coming weeks, months, and probably another recession?
  7. Are you investing for a stock that yielding only 1.33%?

Yep! All of the above. That is why I’m buying 10 shares at the 52 weeks low. I have AAL on my watch list since the beginning of 2015. But I haven’t found a good entry point. I figured, at the 52 weeks low session would be a good entry point.

Some good points for buying

  1. Insider transaction shows as of earlier May this year, there are a lot of buys. That shows management is confident about the company, and they feel the stock price is low enough to buy.
  2. 42% decline in price is a good entry point for me. I might have to average down 2 times to really find the bottom. I might end up having 30 shares for a full position by the year end. But I’m not willing to go all out for 30 shares today.
  3. 9% drop in a single day is also a good entry point, especially I don’t have much cash right now.
  4. UK is leaving the EU is predictable, as Britons always do what their ancestors do, leave during tough time, then call for help when war is in the backyard. Ehhhk!
  5. Travelers are afraid of traveling? Could be, but that just mean, they might travel more locally in the US.
  6. Profit decline? Just look at the P/E: 2.53. The stock is trading at 2.53x the earning. Which company in the S&P do you see that?
  7. Dividend at 1.33% is low. But look at the payout percentage: 3.59%. The company is stringent at raising dividend, but they’ll have plenty of room to growth if they decide to boost dividend.

That’s all folks! LOL 🙂 I’m going to go on a 10-days vacation to Puerto Rico for a relative’s wedding. So, unless, something more dramatic happens, I might still holding on to 20% cash for now. DOW might drop back to 15000 level again this year. I’ll buy at full speed then.

What do you think about my buy? Are you buying or waiting for the further decline before making buying decision? If yes, what did you buy?

Boeing_787_Dreamliner_LOT_13_interior

*Are you on board?”

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6 comments on “Recent Buy – AAL

  1. DivHut
    June 24, 2016

    While I like the fact that you are buying during this dramatic sell off, I personally never have invested nor plan to invest in any airline. That’s just my personal thing. Nice to take advantage of the sell off though and buy at better pricing, value and yield.

    Liked by 1 person

    • Vivianne
      June 24, 2016

      You are in the same line with Mr. Buffett, he has said many times that he would never be in the airline business.

      As a traveler, I’d use AAL services at least 3-4 times a year, so why not own a small piece of the business.

      No doubt that I see more pull back. In that case I’ll average down.
      S&p only lose 2% today, I’d rather buy more beaten down stocks.

      Some stocks on my watchlist: CS, CSBC, BP… These will continue to be down, even though I they’ve lost 66% from the 52-week high. Yikes!

      Like

  2. Jeff
    June 25, 2016

    Haha! when I first saw AAL I thought it was AAPL. American Airlines appear to be in very good business as during my last trip to the states, the AAL waiting platform is always full no matter what time of day it is. Will look into it. 🙂

    Like

    • Vivianne
      June 25, 2016

      Aapl is on my watchlist, but I’m waiting for the stock to pull back to the $80s before pulling the trigger. On my retirement account , aapl is in the s&p500 so I’ll be ok either way.

      Like

  3. Dividend Diplomats
    June 26, 2016

    Airlines are not my cup of tea. However, you made the choice to get the stock you wanted at the price you wanted. I respect the check out of your patience over the last two years as you waited for the price to fall. Hopefully it pays off for you in the long run!

    Bert

    Like

  4. Tim
    July 22, 2016

    AAL is a great airline stock.. I picked it up right when AMR came out of the bankruptcy filing and while it hasn’t been a high flyer.. the consistent dividend works and I use their products and like them so it has been a win.

    Like

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