Time to Buy Airline Stocks?

from http://seekingalpha.com/article/80488-time-to-buy-airline-stocks

Few sectors have been as decimated as airline stocks.  In an era where Google (NASDAQ: GOOG) has a market cap of roughly $178 billion, many are surprised to learn that many airline stocks have market caps of under $5 billion. 

Indeed, many well known names have market caps of less than $2 billion.  The market cap of American Airlines’ parent company AMR is $1.78 billion.  The cap for Delta Airlines (NYSE:DAL) is $1.85 billion.  The cap for UAL Corporation (NASDAQ:UAUA) is $1.09 billion.

To put this in perspective, the market cap of Sirius Satellite Radio (NASDAQ: SIRI) of $3.85 billion is more than 3 times the $1.09 billion market cap of Jet Blue (NASDAQ:JBLU).  The valuations are surprising given the shortage of commercial airplanes and the backlog of aircraft orders at Boeing  (BA). 

Is it time to buy airline stocks?  I think so.  The sector has been beaten down by rising oil prices and now represents compelling value.  According to Business Week, Lehman analyst Garrett Chase is now bullish on the sector. Moreover in a recent interview with Bloomberg, famed investor Jim Rogers admitted that he is buying airline stocks given their attractive valuations. 

As far back as April, George Putnam noted in his Turnaround Letter newsletter ""The airline stocks look awfully cheap to us right now." They have gotten cheaper with reduced market caps across the board.

The sector will experience further consolidation.  But at these levels, the upside looks lucrative.  Now might be the time to get back in.