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Why Barron’s is Bullish on Airlines

from Barron's June 20, 2015

The June cover story on Barron’s Magazine hints at author Jack Hough’s bullish view on the airline industry, saying airline stocks have the potential to perform well over the next year. The article points at lower fuel costs, higher fees and fares, and cost-cutting as tailwinds for the industry despite low valuations. Barron’s names the top four domestic carriers, which are also the top four holdings in the U.S. Global Jets ETF, as those with opportunity for bargain hunters: American Airlines Group, Delta Air Lines, United Continental and Southwest Airlines.


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Enterprise Value (EV) is a measure of a company’s total value. EBITDA is net income with interest, taxes, depreciation, and amortization added back to it. Load factor is the ratio of revenue passenger miles and available seat miles for an airline. Free Cash Flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.