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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Tomato who wrote (7911)	7/31/1999 1:20:00 AM
From: James Clarke	Read Replies (1) \| Respond to of 78796

Airlines I missed Wall Street Week tonight - I made a note to watch it because Julius Malthutis was on, but the Phillies and Braves had a great baseball game going at the time complete with beanballs and fights. Even Julius can't beat that. I know Julius well and there is nobody in the world who knows the airline industry better than he does. The man is a real analyst - he's about 60 years old and has been covering the industry forever. He has forgotten more about the industry than anybody else knows. The man is stuck in a game where 27 analysts cover AOL and 27 have buys on the stock at 155 times earnings. And he is one of a handful that have a buy on an industry leader trading at 6 times earnings. He has been wrong for a long time on the industry but I think he'll be proven right five years from now. I would point you, as would he, to AMR, which I own big professionally. If you want to deal with airlines - there are many reasons not to, most of them are in the price - you don't need to look beyond this one. If you look at AMR carefully and aren't interested, don't bother looking at any other airline - you won't like them either. If you back out AMR's 83% stake in Sabre and recognize that the pilot sick-out in February cost them about $1.50 a share, the airline trades at 5 or 6 times earnings. The company has bought back something like $2.5 BILLION worth of stock in the last two years. In my opinion - AMR has the best management by far among the global airlines, and has for the last 20 years - Herb Kellaher of Southwest is in another league, but that stock trades at three times AMR's valuation. As an airline analyst, I have written memos listing 15 reasons not to own airlines. 20 of those 15 reasons are in AMR's price at 65.So don't tell me this is a lousy industry - I know that. Everybody knows that. Except maybe Julius, who has followed the industry for at least 20 years. His thesis since I've known him is that things have changed. And his argument makes sense. AMR is not a Buffett stock by any means. But should it trade at 1/5 of the market multiple? No way. JJC