AMR – American Airlines (NYSE) – (Closing Price – $8.53)
The stock prices of airlines have taken quite a hit in the last year as speculators sent the price of oil up to record levels. In the past few days oil has pulled back from its record highs and the airlines have started to rally. I expect oil to continue to sell off and I think buying airline stocks is a good short term play. There is also talk of consolidation in the airline industry so this should also bode well for airline stocks.
I think oil will continue to sell off for a couple of reasons. First, the Fed is expected to signal that it is going to stop lowering interest rates for a while. This will help the dollar strengthen and it takes away the major reason speculators have been bidding up oil (they have been buying oil as a hedge against the falling dollar). Second, the high price of oil and the sluggish economy is reducing demand for oil. I think future supply reports will show this.
I believe the entire airline industry is going to rally short term so you have a lot of companies to choose from. I am going to give a buy recommendation of American Airlines with a price target of ten dollars in the next month.
Disclaimer: I have no position in airline stocks.