MESA

[David Randolph]

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.

[David Randolph]

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.

[David Randolph]

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.

[David Randolph]

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

Mesa Air Group Announces Expanded Stock Repurchase Program

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.

[David Randolph]

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.

[David Randolph]

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.

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 

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.

[David Randolph]

AAI open was a gap up and the stock couldn't hold on to those gains. I'll keep the trading plan:

The trading plan is: Hold AAI for as long as it is set to close above the ascending trendline. Today that trendline stands at $15.2.

[shawFund]

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.

[shawFund]

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.

[David Randolph]

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 

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.

[David Randolph]

AAI held up much better than MESA, possibly because somebody knew I would sell it if it were to fall much further  (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.

[shawFund]

Here is the airline index chart and it seems that it reached the top range and is due for a correction.

[shawFund]

Compared MESA with the airline index index, MESA did not follow the footsteps of the index.

It is a much better performer.

[David Randolph]

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.

[David Randolph]

The plan was:

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.

So I sold the stock just before the close at $15.20, taking a 12.5% profit.