Mesa Air Group, Inc. (MESA). The Group's principal activity is to operate as regional air carriers providing scheduled passenger and airfreight services. It also carries freight and express packages and has contract with U.S. Postal Service for carriage of mail. The Group also has code share agreements with America West, Midwest Express Airlines, Frontier Airlines and US Airways. These code-share agreements allow use of the code-share partner's reservation system and flight designator code to identify flights and fares in computer reservation systems, permit use of logos, service marks, aircraft paint schemes and uniforms similar to the code-share partners and provide coordinated schedules and joint advertising. The Group currently operates 182 aircraft with over 1,100 daily system departures to over 165 cities in 44 states, the District of Columbia, Canada and Mexico.
Probably because of the high oil price (I'm bearish on the oil price at this point, and bullish on the airline sector), MESA is extremely undervalued, at least at first sight. I see a market cap of $287.75M, cash in the bank of $258M, a P/E Ratio of 7.71 and a Return on Equity of 41%.
The all history chart is this:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=6833;image)
The stock went nowhere for more than a decade ... now it has an established bull trend, with the oil price peaking and the stock being so undervalued, I perfectly understand the rise:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=6834;image)
This bull trend probably won't stop south of $16. I'm buying MESA at today's open for the 3 Stocks on Fire Portfolio.
Some more information about MESA:
«Mesa currently operates 182 aircraft with over 1,100 daily system departures to over 170 cities, 45 states, the District of Columbia, Canada, and Mexico. Mesa operates as America West Express, Delta Connection, US Airways Express and United Express under contractual agreement with America West, Delta Air Lines, US Airways and United Airlines, respectively, and independently as Mesa Airlines. The Company, founded by Larry and Janie Risley in New Mexico in 1982, has approximately 5,000 employees. Mesa is a member of the Regional Airline Association and Regional Aviation Partners. The Company was named 2005 Regional Airline of the Year by Air Transport World Magazine.»
This is an airline sector stock with a bullish trend, and that's what I want to hold at this moment. I understand that the stock may pullback a little from current levels (I really don't know), but I perceive any pullback as a buying opportunity.
Today oil prices were up sharply and yet MESA held up pretty well. I think it is just a matter of time for the oil prices to collapse and the airline sector to benefit from it. MESA is well positioned, I believe, so I'll continue holding it.
MESA is exactly the kind of stock that I want to hold on the upcoming Bear Market. Not all stocks will go down, and MESA is one of those that will rise, because its sector had a bear market of its own already and the stock is extremely undervalued at this point.
1% rise on a day like today with volume above average sounds fine to me.
We came to the same stock independently, it seems, and with different ideas. I'm holding MESA short at this moment, in expectation of a correction after its recent run-up.
Of course, this is a very short-term play for me; I expect to be out of it, win or lose, very soon.
edit: Looks like profit-taking is done with today; not as deep as I'd hoped, and certainly no panic among the longs...luckily, as MESA turned up, so did my long plays, so there's little damage...
looks like long is indeed the right bet.
Good Morning !
David will not be able to post the regular daily updates today. But he gave me instructions to Hold this position on MESA.
I'll just post an updated chart.
Quote from: robt on October 19, 2005, 01:48:19 PM
We came to the same stock independently, it seems, and with different ideas. I'm holding MESA short at this moment, in expectation of a correction after its recent run-up.
Of course, this is a very short-term play for me; I expect to be out of it, win or lose, very soon.
edit: Looks like profit-taking is done with today; not as deep as I'd hoped, and certainly no panic among the longs...luckily, as MESA turned up, so did my long plays, so there's little damage...
looks like long is indeed the right bet.
You may be right in going short MESA on a short term play, betting on a correction, but longer term I don't think that's a good strategy. But I respect others views, the market wouldn't exist if there weren't different views and strategies.
You see, I buy stocks with bullish trends, and if I were to short some stocks, I would look for those with bearish trends, not bullish, because, as you'll probably know through the years, the trend is your best friend in the markets.
MESA clearly is on an ascending trend. The oil price is coming down as I expected and the stock is extremely undervalued.
I acknowledge that MESA may be a bit overbought here and it may have a correction, but over the medium term I can only see higher and higher prices for this stock. Therefore I'm able to see a correction, knowing it is just profit taking, and I'll keep on holding the stock for the foreseeable future.
MESA is undervalued at this point. Buying a share of MESA you get almost full value in cash (market cap at current prices is $304M and the company has $258M in cash, so when you buy a share for $10.51, $8.92 is cash). Not to mention it has a P/E of 8 and a Price/Cash Flow of 2.35, while profits grew 169% for the 9 months ended September 2005 when compared with the same period in 2004.
Technically, the stock just can't stop going up. There's no doubt I'll continue holding MESA.
Hi David,
I was looking into MESA as well as it showed up on my own screener. Did you notice the $1B debt it has?
-Valueseeker
I've been doing well with my airline sector play. Survivors of the storm are gathering steam, as oil prices are set to collapse in my humble opinion.
I want to buy airline sector stocks with bullish trends. AAI is an airline sector stock and it is near a new 52 week high (maybe tomorrow?).
The company is growing fast, at least on capacity: AirTran Airways Becomes Fastest Airline in History to Reach Milestone of 100 Planes (http://www.marketwatch.com/tools/quotes/newsarticle.asp?dist=¶m=archive&siteid=mktw&guid=%7BFA2EB7D7%2DBB3A%2D4342%2DACC5%2D5AF7D939B16E%7D)
I'll buy AAI for the 3 Stocks on Fire Portfolio.
Bought AAI @ $13.50 for the 3Stocks Portfolio
Quote from: valueseeker on October 23, 2005, 11:30:20 PM
Hi David,
I was looking into MESA as well as it showed up on my own screener. Did you notice the $1B debt it has?
-Valueseeker
You're absolutely right valueseeker, I left debt out of all my fundamental considerations, and obviously that's wrong.
So forget about that cash value thing, we always have to take out debt to that value, and MESA's short and long term debt is $1.29B at this moment.
This explains the undervaluation of the stock, where the P/E Ratio is just 8.34.
It's like the market already knows all available information and it is impossible or really very hard to find anything undervalued. Usually there's a reason, a good reason, for a stock to be undervalued by most common measures, like the P/E Ratio or the Price to Book Value. In MESA's case, it's debt.
The stock came down a bit yesterday, and I think that is a response to yesterday's rise in oil prices. I guess the rise in oil and gold yesterday was due to Bernanke's nomination as FED chairman, because Bernanke isn't so hawkish as Greenspan (the USD also sank against major currencies).
At least over the short term, the market will associate Bernanke to his remarks about the Federal Reserve having a «technology much similar to a printing machine», and that's inflationary. This will make the USD and bonds down, oil, gold and other commodities up.
Until he makes a presentation decoupling from his past, the market will think he will be much less hawkish than Greenspan, and that he will be biased towards promoting economic growth, not fighting inflation.
So I see trouble in the short term for the airline sector and everything with a big portion of costs in oil. So I'll take profits in MESA today.
It looks like oil turned lower again. Maybe the Bernanke effect will last just one or two days. I see AAI in an ascending triangle formation.
I was thinking of selling MESA today, but perhaps not anymore, since I'm bearish on oil going forward and consequently I'm generally bullish on stocks where oil is a high component of costs, like airlines.
If AAI breaksout of this triangle it will have a technical target of $16.40. I'm waiting for this outcome, so I'll keep on holding AAI.
Oil turned lower again this morning. Maybe the Bernanke effect will last just one day or two, and without this effect (probably he will soon dismiss the thought that he will be less hawkish on inflation if and when he talks about that inflation target) I'm pretty bearish on the oil price going forward.
So I will hold MESA after all. No reason to sell here, the trend is still very bullish.
David,,talking about debt, MESA seems to be better than MGI ..I found this
MESA=Debt/Equity Ratio 3.98
MGI=Debt/Equity Ratio 14.13
MESA: HOLD
AAI: HOLD
MESA was up sharply this week so it had a pullback yesterday with the general market that was very weak. The pullback was on lower volume than the advancing days ... this gives me an indication that most people buying is doing it for longer term purposes.
I'll continue holding MESA.
Results were out: AirTran Holdings Reports Record Third Quarter Revenues of $374.6 Million (http://biz.yahoo.com/prnews/051027/nyth011.html?.v=28)
If oil prices weren't up so much over the last year you could imagine were profits would be. But I see oil prices collapsing to below $40 in the next 12 months, so AAI is exactly the kind of stock that I want.
Maybe today AAI will be able to make a bullish breakout of the ascending triangle on the chart below. That would trigger a technical target of $16.40.
MESA rebounded with the rest of the market. There were no news this weekend for the stock. Today I'll present a chart with a larger time frame. I'll continue holding MESA through tomorrow's session.
QuoteMaybe today AAI will be able to make a bullish breakout of the ascending triangle on the chart below. That would trigger a technical target of $16.40.
It did ! So now the stock has a technical target of $16.40. I'm medium term bullish on the airline sector, I'll continue holding AAI.
We have the entire airline sector picking up, and MESA seems to be leading the group, since it started to rise before all the others. I like to go with the leaders.
Today we've had some minor news from the company:
Mesa Air Group Announces New Low Fares for Hawaiian Service (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=3104&guid=%7B914E3D3D%2D419E%2D4EE5%2DA3EC%2D8A8486BF7CA5%7D&symb=)
I'll let the profits run on MESA.
AAI made an ascending triangle breakout and now has a technical target of $16.40. Yesterday was another strong day for the airline sector, and AAI is one of its leaders in terms of share price performance.
Some news today probably with no major impact: AirTran Airways Launches Sale for Travel To/From All Destinations (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=45143&guid=%7B17749A70%2D830E%2D43A6%2DA310%2DAC6ADDF62B1C%7D&symb=)
Showing a 10% profit in just 5 sessions, I'll let the profits run.
Today there was some shift in sentiment towards airline stocks and alternative energy stocks.
Alternative energy stocks seem to be even more volatile than oil related stocks, and they rise when oil rises or is expected to rise. Airlines behave on an opposite way. They climb when oil is falling or expected to fall.
But, if we take a look at the charts, we have two different realities:
- Alternative energy stocks are in downtrends. The move today looks like a rebound in an overall bearish trend.
- Airlines are in ascending trends. The pullback today seems to be just profit taking.
The charts say over the medium term airlines will continue to climb and alternative energy stocks will end up going down again.
So I'll stay with airlines through this possible short term corrective phase.
The company released its October passenger numbers during the session:
AirTran Airways Reports Record October 2005 Traffic (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=45143&guid=%7BD443085D%2D898B%2D484C%2DBB9F%2D742637ECD24C%7D&symb=)
The news brought some buyers to the stock, but the overall profit taking tone around airlines (http://www.marketwatch.com/news/story.asp?guid=%7BF52A0E79%2DB6A0%2D4550%2D9EC4%2D9BC5C1AB35B9%7D&siteid=mktw&) didn't let it rally.
I see today's fall as profit taking in a bullish trend that will soon resume, therefore I'll hold AAI.
I was smart in staying with airlines, nice move from the sector again yesterday. Some generic talk that may help the sector going forward: U.S. may relax airline ownership rules
DOT officials proposes fewer restrictions on foreign investors to increase capital flow to carriers. (http://money.cnn.com/2005/11/03/news/international/airline_ownership.reut/index.htm)
Yesterday's white candle completely erased the earlier red one, with a particular interest: volume was higher on the advancing day. This probably means higher prices to come.
The same news from MESA: U.S. may relax airline ownership rules - DOT officials proposes fewer restrictions on foreign investors to increase capital flow to carriers. (http://money.cnn.com/2005/11/03/news/international/airline_ownership.reut/index.htm)
This will add power to airlines, or maybe some sell the news action ... if airline stocks turn lower today I think it will be just a short term issue, longer term I see them as an attractive group.
Furthermore, between airlines, MESA and AAI show relative strength (LUV was a good pick too, I was stupid when I sold it) and those are the kind of stocks that I want.
David am I looking at a 2yr weekly chart wrong, or has AAI finished with a nice cup going back to May of last year? If so, a nice 4+ week handle would allow you to rejoice just in time for Christmas.
Take care of your health David. We all need you and your wisdom.
I know when to take profits on MESA, and it isn't now, not yet. You can check the «take profit point» on the chart below:
QuoteDavid am I looking at a 2yr weekly chart wrong, or has AAI finished with a nice cup going back to May of last year? If so, a nice 4+ week handle would allow you to rejoice just in time for Christmas.
I generally agree with you, but I don't have much knowledge about the Cup and Handle pattern.
QuoteTake care of your health David. We all need you and your wisdom.
Thanks Tirebldr, I'll do that. Until now I was never concerned by health issues, but now I'm starting to get a bit afraid that if I work too much to get rich then I won't have the necessary health to enjoy it :D (kind of stupid work, I used to watch the DAX futures all day long with the depth of the market, now just about an hour a day, it's like watching a movie, it amuses me ::))
Concerning AAI, oh, I wish I were a CEO. The man, Leonard Joseph, exercised options to buy 100,000 shares yesterday at a price of $3.03 and sold them just below $15 for almost a $12 a share instantaneous and zero risk profit :o
The good news is that he sold his 100,000 and the stock barely moved. In fact today it advanced further north. These airlines are really bullish (and cheap), I'll let the profits run.
MESA had a minor pullback on Friday, to its medium term ascending trendline, which maybe is too steep for an airline stock, advancing $0.12 per trading day (VPHM style).
Anyway, since I saw the chart of the Dow Jones Transports, breaking out to new all time highs, I knew I had to continue holding these winning airlines. According to the Dow theory, the transports lead the industrials. Also look at the NDX, at a new 2005 high.
The leading groups are transports and technology, so I want to hold stock in those 2 groups.
More insider selling and the stock refuses to go down, it looks like this insider selling was already expected by institutional investors, it was «priced in».
Consider what I've said on MESA's thread about the Dow Jones Transportation average, making new all time highs last week. This tells me transports is a leading group (which is bullish for the general market according to the Dow Theory), and I want to hold leading stocks in leading groups.
AAI qualifies, despite of insider selling, so I'll keep holding the stock for the foreseeable future.
I find it hard to believe MESA will hold such a steep trendline, but that would be great :)
But even if the stock breaks this ascending trendline on close (today it will be standing at $11.37) I won't take profits. Why? Because the airline sector is leading the general market to new highs.
I want to be invested in leading sectors. MESA, beside being on a leading sector, is leading its sector on the upward path.
Just follow on the leaders back and keep on holding.
Probably I'll take profits on AAI just when I sell MESA, and the analysis on the two is basically the same, since they're acting like twins.
Again, the airline sector is one of those leading the general market to new highs, and I want to be in that kind of sectors.
No reason to take profits on AAI at this point, just keep on holding.
MESA broke my ascending trendline, which was expected, because the trendline was too steep.
But I can't sell it anyway, here's why:
1) Everything points to an end of the year rally. The transportation index and particularly the airline sector are leading the general market higher.
2) I'm slightly bearish on oil and oil is coming down with the rising US Dollar.
MESA will probably be supported around the $11 area and then push higher again.
We've had two press releases today from AAI, but none had much relevancy as far as the share price was concerned:
AirTran Holdings, Inc. to Webcast Citigroup 20th Annual Transportation Conference (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=45143&guid=%7B6A515371%2D9C2F%2D47F1%2DAA73%2D0DD01FCBA99A%7D&symb=)
AirTran Airways Launches New Service to the Motor City (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=45143&guid=%7B233D35D2%2D1013%2D4CA0%2D9DCF%2DD26A5DF68648%7D&symb=)
AAI came down in tandem with the general market, correcting a bit of last weeks gains. I define today's action as «a normal reaction in a generally bullish trend that will probably resume shortly».
I have an ascending trendline coming at $14.46 tomorrow. I'll keep on holding this airline stock (also read MESA's update).
The DJ Transports Index made a new high yesterday after a short period of consolidation. We got nice volume and a rise on MESA. I'll continue holding.
AAI filed its 3rd quarter 10-Q filing with the SEC yesterday about 2 hours before the close. I don't have time to read it now, but everything seems allright. The transports made a new all time high yesterday and AAI is also near its short term highs. Volume has improved somewhat.
I can only see higher prices for these airline stocks.
Everything is playing out right with these airlines picks: oil is going down as expected, so people are anticipating higher earnings for the airlines that did survive the sector meltdown.
Also, the transports are leading the general market higher, which is a very healthy situation, according to the Dow theory.
I own leading stocks in a leading sector, nothing can prevent me from making some serious money on this bull move, except myself. I will let the trend be my best friend and let the profits run on MESA.
Jesus, AAI made 3 press releases near the close (the third one was after the close):
AirTran Airways Expands Service From Washington Dulles (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=45143&guid=%7BBF2BD6B3%2DC78E%2D48BD%2DA354%2DDE2D0928CD3D%7D&symb=)
AirTran Airways Expands Service to/from Boston (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=45143&guid=%7B7FEA7252%2D3A50%2D4DA1%2DBA77%2DC870B6238599%7D&symb=)
Thank You, Please FLY Through; Coca-Cola, Wendy's and AirTran Airways Celebrate Partnership with First-Ever Fly-Thru Drive-Thru (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=45143&guid=%7B06B840DE%2DA158%2D421B%2D8592%2DE4DB5034F802%7D&symb=)
Nice news :)
The stock jumped 4% to new highs. Oil is going down too, as expected. Nothing can stop these airline stocks from going higher and higher, I believe. Only I can stop myself from making nice returns holding them. But I won't do that, I will continue holding AAI.
Ya dave, i usually pick 3 out of your 6 stocks until 3sof fast came out. and i usually picked the stock like i do a horse at a race. Its name. and im here to say that it never works out. its usually the stock with the unoriginal name or quote that does better IE ( mesa needs a friend)
So i tried to got in this one, and dang, AAi just a little money maker. I sat on LUV and made better profits, but i was lonley and got out. Great reason huh :-[
This baby is my 3rd highes Money maker. 1. PIXR 2. BRVO 3. AAI
Price and volume are expanding to new highs on MESA. Technically the bull move is perfect. I also like the airline sector in a fundamental way (the companies that survived the sector meltdown).
Quoteand i usually picked the stock like i do a horse at a race. Its name. and im here to say that it never works out. its usually the stock with the unoriginal name or quote that does better IE ( mesa needs a friend)
Lol, you're right puenthouse, even Peter Lynch says he prefers stocks with horrible names, something that puts you asleep is the best. Why? Because people don't look at them so often, so that's where you find the best bargains.
And who would have thought something like «Penny of the day:BRVO.OB» would turn out to be a long term investment?
I think you should choose your stocks based on the justification for the pick, not on name.
QuoteSo i tried to got in this one, and dang, AAi just a little money maker. I sat on LUV and made better profits, but i was lonely and got out. Great reason huh Embarrassed
This baby is my 3rd highes Money maker. 1. PIXR 2. BRVO 3. AAI
Cool :) I think TRAD should be on that short list, read that thread, it's almost a sure thing, I believe ;)
AAI is a good friend for MESA, it is even stronger, returning 20% now. I think there's no reason to sell AAI here, because the airline sector is leading the general market to new highs and AAI is a leader on the airline sector. Since I believe the bull run is far from over here, I want to continue holding leading stocks in leading sectors.
MESA will release earnings on Thursday:
«PHOENIX, Nov. 14 /PRNewswire-FirstCall/ -- Mesa Air Group, Inc. (Nasdaq: MESA) announced today that it will release financial and operating results for the fourth quarter ended September 30, 2005 on Thursday, November 17th, 2005. The Company will also hold a conference call on Thursday, November 17th, 2005 to discuss its financial results at 11:00 AM MST (Mountain Standard Time), 1:00 PM EST (Eastern Standard Time).»
Also some bullish comments from Zacks:
«Mesa Air Group Inc. (NASDAQ:MESA) posted fiscal third quarter earnings of 39 cents per share, surpassing last year's 28 cents and exceeding the consensus estimate by 34%. The stock is currently trading around $12 per share, with a price-to-sales ratio of 0.31. The company has earned $1.25 per share over the past 12 months.»
Now I have a 20% open profit on MESA. The stock closed yesterday at a new high. Fundamentals are attractive and the sector is leading the general market up. I'll keep on holding MESA.
The S&P500 went down a bit yesterday, but the airline sector was up. That's why I like to hold sectors with relative strength, they have that for a reason, and if the market suddenly turns south they will be the ones that will show more resilience, contrary to common sense.
So, the SPX down and AAI up to new highs. My kind of stock.
MESA had a big break yesterday to support. I see a correction in a bull trend, not a change in trend. The transports also closed near support area.
I see MESA coming back and make new highs before the end of the year. But of course I won't let a profit turn into a loss.
For now I'll just continue holding MESA.
AAI is making a retest to a medium term support, prior resistance level. The stock can do down a bit more, and I wont be worried, feeling I'm on the right side of the market.
Basic conditions for airlines continue to be favorable at this point and I see the current bull move continuing beyond 2005.
So I need to keep on holding AAI.
Trading Plan for MESA: Take profits at the long term resistance, which for today stands at $12.60. As protection I will sell if the stock is set to close below $10.50.
Trading Plan for AAI: Hold for as long as it is set to close above the ascending trendline on the chart below. Today that trendline will be standing at $15.08.
MESA had a good rally yesterday, but it stalled at $12. It looks like the stock has some resistance at that level, but I believe ultimately it will breakout. If not something else, the general market will take care of it.
MESA released more good news yesterday:
Earnings Surge at Mesa Air (http://www.marketwatch.com/enf/thestreet2.asp?siteid=mktw&guid=%0A%09%09%09%09+%7Ba109136b%2D8065%2D4eb5%2Dac53%2Df64da5270761%7D%0A%09%09%09&link=http://www.thestreet.com/_mktwrm/stocks/transportation/10253378.html)
Mesa Air Group Announces Expanded Stock Repurchase Program (http://www.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=3104&guid=%7B504F09C0%2D3DEA%2D4B54%2D94F3%2D47820043D571%7D&symb=)
If we annualise the 4th quarter earnings we see the company earned $1.4 per diluted share, so the P/E Ratio is 8.2. Earnings growth is 40% YoY. If you think probably things can only get better, with oil coming back down now and continued growth in the number of passengers, you get the picture that this company is way undervalued.
But for now I'll keep the trading plan: take profits at $12.60, and as downside protection sell if it is set to close below $10.50.
Nice reaction from AAI to the lower oil prices and the support area it reached yesterday. Everything is ready for the uptrend to resume.
The trading plan is: Hold AAI for as long as it is set to close above the ascending trendline. Today that trendline stands at $15.13.
QuoteMESA had a good rally yesterday, but it stalled at $12. It looks like the stock has some resistance at that level, but I believe ultimately it will breakout. If not something else, the general market will take care of it.
True, $12 put a cap on MESA again. But that's only for the short term, I believe.
I was reading the news that came out on Thursday again and that stock repurchase program is quite significant. You see, the company says it will buy back 10 million shares and the number of shares outstanding is just 28.92M :o
So, more than 1/3 of this company will be bought by the company itself. They previously had a plan of buying 8M shares, and they already bought 7M, under pretty severe market conditions.
Considering this I don't want to sell at the long term resistance. I want to hold long term.
AAI open was a gap up and the stock couldn't hold on to those gains. I'll keep the trading plan:
QuoteThe trading plan is: Hold AAI for as long as it is set to close above the ascending trendline. Today that trendline stands at $15.2.
I have been avoiding to buy airline stocks for a whole as several big airline companies filed BK recently.
So after David's buy on MESA and AAI, I ignored it. But as the MESA dipped during the last two days, I have a close look at its fundamentals.
To my surprise, it is making money under very difficult environment and it is buying its own stock.
So, I finally take a position today on MESA in airline sector.
Airline sector seems in overbought and is down two days in row. After I bought it today, I found this and sold it one hour later made $0.20 gain!!
Candlesticker also gave sell signal.
Wait and see.
Good luck for your short term operations shawFund :)
The explanations I find for the last 2 days 11.5% fall in MESA are:
- The stock was overbought;
- Rise in oil prices.
I think these are just short term events. MESA is truly undervalued here. For the nine months ended September 30th, it made $1.35 profit per share. If we assume no growth for the 4th quarter the company will make $1.8 in EPS and it is trading at $10.67. This means the P/E Ratio is something like 5.93 and the earnings growth from 2004 was 114%.
If this isn't enough to attract investors and make the PPS rise, this will:
«Mesa Air Group, Inc. (MESA) today announced that its Board of Directors has authorized the Company to repurchase up to an additional ten million shares of its outstanding common stock.»
This is more than 1/3 of the number of shares outstanding :o
Fundamentally, there's only one way: up !
But, the stock is heading down now. That means the market is saying «sell» or at least «don't buy», right? I don't think so, because 2 days don't make a trend and the sell off hasn't produced much technical damage to the chart.
I admit MESA may come down to the long term ascending trendline on the semi-log chart, but maybe the fall will stop here at the $10.5 support area and I'll just have to draw a steeper trendline later.
I will continue holding MESA for the long term.
AAI held up much better than MESA, possibly because somebody knew I would sell it if it were to fall much further ;D (of course not)
I'll continue with my trading plan of holding for as long as the stock is set to close above the ascending trendline on the chart. For today that trendline stands at $15.25.
Here is the airline index chart and it seems that it reached the top range and is due for a correction.
Compared MESA with the airline index index, MESA did not follow the footsteps of the index.
It is a much better performer.
Thanks for that comparison ShawFund, MESA really has relative strength within its sector. I think MESA will rise in good and bad market environments. Even with oil prices rising from $40 to $70 the stock advanced.
The market cap for MESA is much lower than its peers, with no apparent justification, quite the contrary. MESA's market cap is $308M, AAI is $1.33B, LUV is $12.91B, AMR is $3.03B, just to name a few.
The all time high is $24, set in 1993. I could see the stock surpassing this value with ease, as time goes by.
I'll continue holding MESA for the long term.
The plan was:
QuoteI'll continue with my trading plan of holding for as long as the stock is set to close above the ascending trendline on the chart. For today that trendline stands at $15.25.
So I sold the stock just before the close at $15.20, taking a 12.5% profit.
Volume was so low on MESA that I had to double check it with another source. No significant news were out. I'll just continue holding it for the long term.
Volume was so obviously low due the the short session on Friday that the slight cut of the ascending trendline on the chart can't be considered significant.
I'll continue holding MESA for the long term, great fundamentals here.
$10.5 is supporting MESA pretty well, but I don't care if the stock holds this level or not. I see at least a 100% rise in 1 year and I want to hold for that long.
The company is buying back a third of its outstanding shares, it has almost as much cash as market cap (though a lot of debt too), solid revenues and earnings growth.
MESA is a long term holding of the 3 Stocks on Fire Portfolio.
My take on MESA:
(1) The charm of these regional carriers is that they have definitive contracts with major airlines which protects them from varying fuel prices, union issues, etc. With MESA's step into starting a "standalone" airline to provide Hawaiian inter-island service (it will be responsible for fuel, repair contracts, and possibly more), uncertainty is increased. In my opinion, this is why it has underperformed the other regionals since the expansion plans were announced. Once the uncertainty settles, the outlook should improve.
(2) MESA is largely being ignored while the rest of the market does its "boom" thing. But the strength is running out -- money that has gone into high P/E companies like SBUX and riskier tech will slowly trickle into value stocks in hot sectors. What will those be? Stocks like KOMG (low P/E, my stock pick, a hard drive platter supplier) and MESA. In my opinion, MESA and other profitable carriers are in a great position -- "resting" while the rest of the market goes wild. Stocks need rest :)
Anyway, I believe stocks like MESA will significantly outperform the market when the strength of the current bull-run begins to waver.
PS: Darn you (and congratulations!) to Lucas Scott who picked GTE. I can taste that $1000 stock picking reward, but there is no way my KOMG (up 24%) is going to catch up with an 83% gain. Very nice!!!!
Thanks for your thoughts and analysis on MESA owen654321 :) And yes, Lucas Scott, with a 71% gainer (GTE) will likely be the winner of the first edition of the 3 SOF Stock Picking Contest (congrats :D), but we still have some days to go, and you're at second place, not bad, but the winner takes all :D ... I wonder if I should participate in the second edition.
Tuesday was a good day, because the airline sector was down and MESA was up. I would like to see some decoupling of MESA, because my analysis says the company is undervalued in comparison with its peers. My reasoning tells me that, even though I think the airline sector will outperform the general market (as it has been doing), MESA will outperform the airline sector.
I'll continue holding MESA for the long term.
MESA went down 4% yesterday, that wasn't pretty. Probably in part it has to do, as oewn654321 said, with the company's expansion plans. It wants to be an independent carrier, and this way it may lose its charm.
But I don't think so, I believe this is the way for MESA's market cap to grow from about $300M to the billions like other airlines.
You can read more about this issue on this article: Regional Airlines Expand, Majors Suffer (http://biz.yahoo.com/ap/051127/regional_airlines.html?.v=2)
The fall was hard but I'll continue hanging on for the long term, this company has as much cash as market cap, and the earnings multiple is 7. Any risk is already priced in, I believe.
I bought in recently when it was on TL2 support. Now it has fallen below that...any opinions as to what I should do? Would you expect the price to fall to TL1 now?
Thanks for the input...Jody
Quote from: 422fwhp on December 01, 2005, 07:27:00 AM
I bought in recently when it was on TL2 support. Now it has fallen below that...any opinions as to what I should do? Would you expect the price to fall to TL1 now?
Thanks for the input...Jody
The risk exists for MESA to come down to TL1, today at $8.91. If you bought exclusively based on TL2 support, now you have no reason to hold, the support was broken on the downside.
I'll continue holding because my motive to buy wasn't the short term ascending trendline, but the longer term bullish trend and very attractive fundamentals. This fundamental part is a dangerous game, it allows for more risk and more upside potential too. I think it is hard to hold a stock, say, for 2 years and a 300 or a 400% gain based exclusively on technicals, there's always a lot of noise and many false signals on the charts.
On the other hand, the moment you perceive fundamentals are no longer attractive, probably there's already a big loss to be taken.
I always think about my motivation to buy ... is it still valid? If yes, I'll continue holding, if not, I'll sell and move on to another stock.
Good luck 422fwhp :)
QuoteI'll continue holding because my motive to buy wasn't the short term ascending trendline, but the longer term bullish trend and very attractive fundamentals. This fundamental part is a dangerous game, it allows for more risk and more upside potential too. I think it is hard to hold a stock, say, for 2 years and a 300 or a 400% gain based exclusively on technicals, there's always a lot of noise and many false signals on the charts.
If I were just a technical guy I would be out on Wednesday, when MESA broke the $10.5 horizontal support on the downside. But since I'm also a fundamental trader (because to catch a big long term move you can't rely on technicals, there are too many false signals) I'm still in and the stock closed back above $10.50.
I'll continue holding MESA for the long term.
Nothing new about MESA, both on a fundamental and technical basis. I'll continue holding the stock for the long term.
MESA released its November traffic figures yesterday just before the open. Not that it has any impact on the share price over the short term (which seems to fluctuate more with oil futures than anything else), but I think it matters for me as a long term holder of the stock.
Analyzing the figures I see growth accelerating for the company, as you can see on the table below:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=11034;image)
In the three categories disclosed, passengers, available seat miles and load factor, YoY growth was higher in November than in the 3rd quarter.
Despite of the recent decline phase on the stock price, I think the uptrend will resume and the stock will make new highs soon, therefore I'll continue holding it for the long term.
The airline stocks are all down last few days and Cramer said on CNBC tonight: "SELL SELL all airline stocks". May be the oil price is going higher as US really becomes cold.
On the other hand, online travel related stocks are very hot. I have been holding TZOO and EXPE for a month. Here are the charts:
Thanks for your input shawFund :)
Cramer said that? That's a good explanation to why airlines were weaker yesterday, but that also almost leads me to buy AMR, since the stock rose a lot yesterday (and over the last couple of weeks), despite the sector weakness and Cramer's take.
I don't own MESA because it is an airline. I own it because of its specific fundamentals. I think the stocks recent weakness may be explained by options players activity. This is a short term effect and an inverted analysis, and I said I would never do that again.
So what I have to say is this: MESA's fundamentals are attractive and improving, therefore I'll continue holding it for the long term.
Yes, AMR is the best performer in airline sector. It gained 2.9% again today.
Here is the table which listed the performance within this sector (BK companies are not in such as Northwest, Delta, United, etc) sorted based on yearly return.
AMR is the number 1. and MESA is number 5 based on yearly return.
However, based on monthly return, MESA is one of the worst, down 9.21%.
AMR gaied 33%, HA 39%, CAL 32% MEH 26%, ...
Among 22 stocks in this sector, there are 16 gainers, and only 6 losses in last 4 weeks.
Thanks for that table shawFund, AMR is really hot :)
MESA didn't had any news or new technical developments, I have little doubts the stock will come back and make new highs, I'll continue holding it for the long term.
Since 2003 MESA's revenues and profits are growing steadily and the stock now has a trailing earnings multiple of 7.26. Earnings per share growth is 92.5% and the earnings multiple is 7 ???
This undervaluation, just because it is an airline, just because of the high oil prices, can't go on for long. The company achieved these results with already high oil prices, and it continues to grow a lot year on year.
They have $1.1B in sales and a market cap of just $283M at this point. I know the airline sector has been out of favor for years and some of the industry leaders filed for bankruptcy, but I don't see this happening with MESA, not at all.
The stock may come down further to the ascending trendline, but I still consider this to be one bearish intermediate trend within a longer term bullish trend that will take MESA to more than double its current share price.
I believe that Aloha airlines re-emerged from bankruptcy today and will be keeping its flights/pilots/etc. I have no clue what this means in terms of MESA's planned Hawaiian inter-island service. Hopefully they will issue a press release to let us know if the expansion is still on, and/or if they will lose money from any changes in plan for their Hawaiian island service. This is most likely why MESA was down to $9 in after-hours trading. I am feeling the pain looking at MESA in my portfolio but I have no real reason to sell, so I will continue to hold in hopes of better times... :)
I sold MESA two days ago.
I do not love any particular tock. I only trust market.
If stock is down and down hard, there must be many sellers and must be some reasons.
I cannot allow the EYII.OB mistakes happened to my portfolio again. Maximum pain is 7% but normally 3-5% is quite huge for me. Also I will not let the profit turned into loss. That will be very painful.
I may re-enter it later when things become clear.
Quote from: owen654321 on December 13, 2005, 12:41:14 AM
I believe that Aloha airlines re-emerged from bankruptcy today and will be keeping its flights/pilots/etc. I have no clue what this means in terms of MESA's planned Hawaiian inter-island service. Hopefully they will issue a press release to let us know if the expansion is still on, and/or if they will lose money from any changes in plan for their Hawaiian island service. This is most likely why MESA was down to $9 in after-hours trading. I am feeling the pain looking at MESA in my portfolio but I have no real reason to sell, so I will continue to hold in hopes of better times... :)
Yes owen654321, probably this was the rumor (now news) that was taking MESA down so hard. Now the company has two options:
1) Go ahead with the expansion plans, even with fierce competition;
2) Give up those plans and look for better opportunities.
As an investor in MESA stock I look back and think of the reasons that led me to buy this stock. None had to do with the expansion plan to the Hawaiian inter-island service. As a matter of fact the stock started declining immediately after the expansion plan was announced.
Either way, this seems to be a classic «sell the rumor, buy the fact» thing. And MESA, opening near $9, will be right at support.
The fact that the company may have problems with its expansion plan in my view won't change the fact that it has an earnings multiple of 7 and strong revenue and profit growth. Also I don't expect it to change the fact that the company will buyback 1/3 of its outstanding shares.
These are the facts that led me to buy this stock for the long term and they are intact. Therefore I'll continue holding it for the long term, I'm expecting 2 to 3 bags of profit on MESA.
I believe today's open will be a good opportunity to add shares (maybe it will close the gap between $8.67 and $8.86, I don't know), buy my internal money management rules don't allow me to that.
Bought it this morning after open at $8.40.
Will sell it if it fells below $7.90. That is the maximum pain I could have.
If it goes up, will hold it.
Roger that! In at $8.45 so I should have minimal downside risk...just like I like it.
Definately appreciate the updates David.
laterz...Jody
Put some money onto the MESA!!! ;)
Great, Terlisa.
I wanted to buy more but I didn't have any more fund..
By the way, I bought SIRI with you but it's not doing well.. :-\.
Well, I'll keep track of your update.
Thanks.
Quote from: minkielover on December 13, 2005, 08:53:50 PM
Great, Terlisa.
I wanted to buy more but I didn't have any more fund..
By the way, I bought SIRI with you but it's not doing well.. :-\.
Well, I'll keep track of your update.
Thanks.
I know, they upgrade SIRI 2 days ago to "BUY" then downgrade today to "SELL" ...what the **** :-\
Quote from: shawFund on December 13, 2005, 09:54:54 AM
Bought it this morning after open at $8.40.
Will sell it if it fells below $7.90. That is the maximum pain I could have.
If it goes up, will hold it.
Good move and strategy shawFund :)
Quote from: 422fwhp on December 13, 2005, 10:28:48 AM
Roger that! In at $8.45 so I should have minimal downside risk...just like I like it.
Definitely appreciate the updates David.
laterz...Jody
Thanks Jody and yes, $8.45 seems to be a great short and long term buying price.
Quote from: Terlisa on December 13, 2005, 08:41:17 PM
Put some money onto the MESA!!! ;)
Nice chart Terlisa, as usual :)
QuoteI know, they upgrade SIRI 2 days ago to "BUY" then downgrade today to "SELL" ...what the **** :-\
I don't think it is a good idea to buy or sell based on brokerage upgrades/downgrades.
People heavily sold MESA yesterday, specially at the open, because a competitor is coming out of bankruptcy, Aloha Airlines, a private company that makes inter-island flights in Hawaii. But some problems for Aloha emerged yesterday: Aloha may not exit bankruptcy this week (http://www.bizjournals.com/pacific/stories/2005/12/12/daily12.html?from_rss=1)
I feel all this is nonsense, because I don't think the expansion plans to Hawaii are all that significant. Remember this: «As of January 5, 2005, it had a fleet of 183 aircrafts with approximately 1,100 daily system departures to 177 cities, 41 states, the District of Columbia, Canada, Mexico, and the Bahamas. Mesa Air Group was founded in 1980 and is headquartered in Phoenix, Arizona.»
Short term the news and gossip are impacting the stock price, but longer term fundamentals reign supreme. Fundamentally speaking I see a company with fast growing revenues and profits in an era of pretty high oil costs and difficulties for the airline sector. I see a company that is buying back shares, thus reducing the number of shares outstanding, so price needs to rise to keep the same market cap.
Technically the stock closed the gap it left open last October and made a white candle with above average volume.
I'll continue holding MESA for the long term, I'm convinced this Hawaiian talk will go away soon and the stock will make new highs.
MESA is coming back after a big drop to support and «closing gap» levels. The 10-K quarterly report from the company was just published and I'll love to read and analyze it, but now I don't have enough time.
MESA is a case where long term investors got a nice buying opportunity because of short term rumors and news.
I'll continue holding MESA for the long term.
If any stock I would like to have in airline sector, it is AMR or CAL.
AMR gained another 10% in last few days.
You're right, AMR had an amazing run, I wish I bought it. But, you can't have them all ...
Here are charts for historical trends in Revenues and Earnings Per Share for MESA:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=11838;image)
We can clearly see a trend for growth over the last 3 years, with revenues of $1.1B in fiscal 2005. This leaves the company with a Price to Sales Ratio of 0.24, where the industry's P/S Ratio is 0.55.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=11839;image)
Earnings for MESA have been quite volatile in its history, but now we have 3 consecutive years of profits. 2005 was an all time high both in terms of revenues and net income.
With an EPS of $1.35 MESA has a Price Earnings Ratio of 6.92, where as the industry's average P/E Ratio is 14.2, or more than double.
Using just these two criteria we see that on relative terms MESA is trading at a 50% discount to its industry. It needs to rise 100% to be on average.
If we take into account that the company plans to buyback 1/3 of its shares outstanding, the stock price needs to rise 200% for the stock to achieve the industry average valuation.
Technically the long term trend is bullish, but there was a short to medium term decline over the last month. Why? Because of the company's expansion plans to Hawaii. This doesn't make any sense, since 99% of the company's revenues come from code-share agreements with other airlines:
«Approximately 99% of our consolidated passenger revenues for the fiscal year ended September 30, 2005 were derived from operations associated with code-share agreements. Our subsidiaries have code-share agreements with America West, Midwest Airlines, United Airlines and US Airways. The remaining passenger revenues are derived from our independent operations.»
I'll continue studying MESA and continue holding it for the long term.
MESA is recovering well from previous declines. On Friday Zacks issued a report about it:
«Mesa Air Group, Inc. (NASDAQ:MESA) released its fiscal fourth-quarter financial results in mid-November. Earnings per share were ahead of analysts' expectations by nearly 17% and surpassed the prior year's performance. Total operating revenues increased 18.9% year-over-year. The stock is currently trading around $9.30 per share, with a price-to-sales ratio of 0.24. The company has earned $1.30 per share over the past 12 months.»
As we've seen MESA is about 50% undervalued when compared to the airline sector. But of course that undervaluation has a reason, an it is not about debt or the company's expansion plans. It can be more serious.
I'll have to dig further to know the truth and I'll do it on my next update for MESA. For now I'll just continue holding MESA.
As we know MESA is undervalued, but that's for a good reason, as we can read on the paragraphs below, taken out of the last 10-Q report from the company:
«Approximately 99% of our consolidated passenger revenues for the fiscal year ended September 30, 2005 were derived from operations associated with code-share agreements. Our subsidiaries have code-share agreements with America West, Midwest Airlines, United Airlines and US Airways. The remaining passenger revenues are derived from our independent operations.»
«As discussed in Note 2, substantially all of the Company's passenger revenue is derived from code-share agreements with United Airlines ("United"), America West Airlines, Inc. ("America West"), and US Airways, Inc ("US Airways"). UAL Corp., the parent company of United, has not emerged from reorganization under Chapter 11 of the U.S. Bankruptcy Code. Additionally, US Airways filed for bankruptcy protection and in September 2005 the bankruptcy court entered an order confirming US Airways' plan of reorganization, which includes the merger between US Airways and America West. As a result of US Airways' emergence from bankruptcy and their non-assumption of the Company's code-share agreement, the Company expanded its regional jet code-share agreement with United and entered into a new code-share agreement with Delta Air Lines ("Delta"). In September 2005, Delta also filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Delta has not yet assumed the Company's code-share agreement in its bankruptcy proceeding.»
«If our code-share partners or other regional carriers experience events that negatively impact their financial strength or operations, our operations also may be negatively impacted. We are directly affected by the financial and operating strength of our code-share partners. Any events that negatively impact the financial strength of our code-share partners or have a long-term effect on the use of our code-share partners by airline travelers would likely have a material adverse effect on our business, financial condition and results of operations. In the event of a decrease in the financial or operational strength of any of our code-share partners, such partner may seek to reduce, or be unable to make, the payments due to us under their code-share agreement. In addition, they may reduce utilization of our aircraft. Although there are certain monthly guaranteed payment amounts, there are no minimum levels of utilization specified in the code-share agreements. UAL Corp., the parent company of our code-share partner United Airlines, has not emerged from reorganization under Chapter 11 of the U.S. Bankruptcy Code. Additionally, US Airways, which accounted for 31% of our consolidated passenger revenue for the fiscal year ended September 30, 2005, filed for bankruptcy protection. On September 16, 2005, the Bankruptcy court entered an order confirming the debtors (US Airways) plan of reorganization, which included the merger between US Airways Group and America West Holding Corporation, the parent company of America West Airlines. US Airways Group will operate under the single brand name of US Airways through two principal operating subsidiaries, US Airways, Inc. and America West Airlines, Inc. As a result of US Airways' emergence from bankruptcy and their non-assumption of our revenue-guarantee code-share agreement, we expanded our regional jet revenue-guarantee code-share agreement with United and entered into a new revenue-guarantee code-share agreement with Delta and are currently working to transition the jets flown under the US Airways code-share agreement to the United and Delta arrangements. In addition, on September 14, 2005, Delta Air Lines filed for reorganization under Chapter 11 of the US Bankruptcy Code. Delta has not yet assumed our code-share agreement in its bankruptcy proceeding and could choose to terminate this agreement or seek to renegotiate the agreement on terms less favorable to us. If any of our other current or future code-share partners become bankrupt, our code-share agreement with such partner may not be assumed in bankruptcy and would be terminated. This and other such events could have a material adverse effect on our business, financial condition and results of operations. We may also experience additional costs that could adversely affect our operations if we experience any delay in the transition of aircraft flying under our US Airways code-share agreement to United or Delta. In addition, any negative events that occur to other regional carriers and that affect public perception of such carriers generally could also have a material adverse effect on our business, financial condition and results of operations.»
In short, the reason for MESA's low earnings multiple is:
1) 99% of its revenues come with Code-Share Agreements with major airlines (United Airlines, America West Airlines and US Airways).
2) United Airlines filed for bankruptcy in September.
3) US Airways also filed for bankruptcy in September 2005.
4) US Airways merged with America West Airlines after its emergency of bankruptcy. US Airways did not assume its Code Share Agreement with MESA.
5) MESA entered into a new Code Share Agreement with Delta Airlines, but, also in September 2005, Delta filed for bankruptcy and Delta has not yet assumed the Company's code-share agreement in its bankruptcy proceeding.
6) MESA said it would expand to an inter-island Hawaiian service, but competitors are coming out of bankruptcy, so the market didn't like the company's move.
These 6 points fully explain why MESA's earnings multiple is so low. The risk is revenues from the company are cut in more than half. But I find it odd that when all these bankruptcies have emerged, MESA's stock actually went up:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=12053;image)
It looks like it was all discounted at that point.
The fall from MESA started on November the 18th, that was the day after a conference call from the company. I don't have time to listen to it now, but I guess guidance for the 4th quarter wasn't good.
Reading back to what made me buy MESA and say I would hold it for the long term is no longer valid. The company is dependant on other airlines that filed for bankruptcy and turned their back on MESA. Also, the share buyback program, isn't as valid as it seemed, because the company could have bought more shares on the previous program and it didn't. Only bought around $5 and $8 and will only buy more if the price is really attractive (probably between $5 and $8).
If MESA's revenues are indeed cut by 30 or 40% in 2006, profits will erode or disappear and all multiples I was basing my investment will be gone.
The 3 Stocks on Fire Portfolio shows just a 2.91% loss in MESA at this moment. I'll take it without hesitation around today's open.
Do you have a recommendation for those of us who bought on the last dip?
Currently have 13.7% profit.
Thanks in advance.
Jody
Consider yourself lucky, and "take it without hesitation around today's open." ;D
For airline sector, buy the leader. Right now the leaders are AMR and CAL.
Market never cheated us no matter how good the company looks like.
Thx for CAL Shaw.
Looks great....applaud.
Jody
Is the value of MESA still there?
Hmmmm... ;)
Sold out of the 3sof portfolio almost a year ago to the day. ;)
Another airline stock making some noise but bumping up against heavy resistance...
Had some movement here recently.......
keep my eye on this as well.......big tumble
running well the last 2 trading days...