Three Great Ideas for the Earnings Season

Alcoa (AA) has kicked off the earnings season, but the market turmoil looks set to continue. I have been bearish on the U.S. stock market for a few months now, and my bearish stance has resulted in double-digit profits as my short calls on many stocks have played out nicely.

Entering the earnings season, I suggested investors to keep almost 60% of their portfolio short with overvalued companies. However, in this article, I will give my opinion on the stocks that investors can buy going into the earnings.
All the three stocks are from the aviation industry, and my recommendations are only for the short term because I am still bearish on the market. However, since oil prices have plunged significantly, and air fares have stabilized over the last two months, I think airlines are going to have a great earnings season and the three stocks discussed below will profit the most from it.

JetBlue (JBLU)

JetBlue was the best performing airline stock in 2015, however the stock has been hammered in the last few weeks. The company slashed its unit revenue guidance and as a result, investors have punished the stock. However, I think the stock has fallen too much and with airlines expected to start reporting earnings from Monday, stocks I the industry will move much higher even if for a short period of time.

JetBlue’s smart expansion and revenue growing initiatives should offset the falling unit revenue and a strong quarter can drive the stock price much higher from the current levels. Hence, I think investors should buy JetBlue going into earnings.

Volaris (VLRS)

JetBlue and Volaris were my two favorite airline stocks in 2015, and both were the best performing stocks of the aviation industry. Although I have recommended investors to sell them and book profits, I think Volaris is also a buy heading into earnings. Lower oil price, growing aviation demand in Mexico, and strong international expansion should help Volaris share a strong quarter, pushing the stock higher. Hence, like JetBlue, investors should buy Volaris for the short-term going into earnings.

Virgin America (VA)

Despite the ongoing price war in the aviation industry, Virgin America’s (VA) unit revenue has remained almost flat. Just like other stocks, shares of Virgin America have also fallen off a cliff and this represents a good short-term buying opportunity. Virgin America has slowly expanded its wings and is entering new markets. The company’s smart expansion and focus on customer satisfaction makes it a good pick heading into earnings.


All in all, I expect cheaper fuel and stabilizing ticket prices to benefit all airlines heading into the earnings season. However, in my opinion, JetBlue, Volaris, and Virgin America present the best buying opportunities. Hence, I think investors should buy these three stocks, but only for the short-term.
Published on Jan 14, 2016
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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