Turbulent Times Could Bring Sky High Profits

As promised, here is my trade for the week:

As I scanned the financial news I was looking at  “Trending Tickers” on Yahoo! Finance and last night I saw United Airlines (UAL) lost 11% on some news that it wanted to compete on price with the budget airlines.  Investors didn’t seem to like this news and a brief analysis I watched said their margins were already too tight and this could drive them to lose money.  United already had a rough 2017 with several scandals that painted them in a bad light; you can Google “United Scandal” to learn all about it.  The company has been working on its PR in an attempt to repair its image.

In my last post, How to BUY Profitable Stocks, we know the PE Ratio is very important to measure companies against their competitors.  Here are all the airline PE ratios I could find quickly:

17.8  Southwest (LUV)
14.1  American (AAL)
13.2  Spirit (SAVE)
12.9 China East (CEA)
12.6 China South (ZNH)
11.4  Delta (DAL)
11.4  JetBlue (JBLU)



Over the past few years, the airlines have seen many ups and downs, as shown in the graph above.  I didn’t take a whole lot from the 1-year and 5-year graphs but they do show a general upward trend with some volatility. The price for UAL has more than doubled in the past 5 years.  The PE Ratio is the lowest in the industry and the recent price drop is a buying opportunity for me.  Even if they have trouble being profitable with their new strategy, they can always go back to the old one.  I’m having trouble finding a reason not to buy this stock.

One last note, we see that in pre-market trading (purple circle above) the price is already starting to recover, most likely due to other bargain hunters like myself.  In order to avoid buying higher than I want to, I set up a LIMIT trade for 15 shares at $70.  This means that if the price goes above $70 before my trade is executed, nothing will happen.  The order was placed just before 7 am eastern and should be executed at 9:30 when the markets open.

I made the following transactions:

I transferred $500 from my side hustle checking account to my brokerage account
I bought 15 shares of UAL for $69.36 each for a total cost of $1,047.35.


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4 thoughts on “Turbulent Times Could Bring Sky High Profits

  1. Nice grab. I agree that there are often easy pickings when a stable company with a low PE gets beat up by an earnings miss or other report. Last year I picked up TGT at $54 & $50 in the same circumstance and rode it until $63.

    1. Bearded Vet,

      Thank you for reading and for your question. The PE Ratio is a way of comparing different companies that are in the same industry. If everything else is equal (it never is) a low PE Ratio indicates that the stock is undervalued and due to have a price increase. The opposite is true too if a company had a high PE Ratio compared to its competitors it could be overvalued and will have a price decrease. In this case Southwest (LUV) I would avoid since they have the highest PE Ratio in the industry.

      Read my last post that deals with this exact issue here:

      Thanks for reading! Happy trading!!

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