by Marc Lichtenfeld
Senior Analyst, Smart Profits Report
It can often be quite a lonely place and the investment crowd may call you all kinds of derogatory names - but when it comes to stock picking, nothing beats the feeling of striking out on your own, going against conventional wisdom and being proved correct.
And you know what? The rancor you may receive along the way is actually a good thing - as I’ve discovered at first-hand. When I wrote for TheStreet.com, the more hostility I encountered from readers, it usually meant that I was on the right track.
For example, during the height of the real estate boom, I recommended shorting Florida homebuilder and landowner St. Joe Company (NYSE: JOE). You should have seen the reaction I received! I got so much hate mail (and even a few threats) that I was sure it was a slam-dunk. It was. Within months of my column, JOE shares plunged about 50%.
I’ve enjoyed many calls like that over my career. But this one could be the most ambitious and optimistic one yet.
That’s because if there is one market industry that is so unpopular and so universally hated right now that you’ll probably think I’ve lost my mind to even suggest that it can bounce back. Can you guess what it is?
Profit From The Airline Industry
I believe you need to keep your eyes on the airlines.
There… I said it.
I can imagine the incredulous look on your face at the moment - and I can understand why. Let’s deal with the bad news first…
The biggest and most obvious pressure right now is oil sitting at $126 a barrel. Jet fuel has soared 50% since January alone and it doesn’t take a rocket scientist to know that this is disastrous for the long-term health of the industry. On Monday, chief executive of the International Air Transport Association (IATA), Giovanni Bisignani said, “The situation is desperate” and the entire industry is “struggling for survival.”
Already, 24 airlines have folded since the start of the year, with Britain’s business class-only airline, Silverjet, becoming the latest victim on May 30.
The group says the airline industry’s fuel bill will soar by $40 billion this year to a total of $176 billion. If oil prices edge back towards the record of $135 a couple of weeks ago and continue to trade there, it says that would turn the industry’s $5.6 billion in profit last year into a $6.1 billion loss. However, if oil drops back to $107 a barrel, that loss would “only” be $2.3 billion.
