Looking Back at My Best Long Idea for 2016

The market turmoil seems to have stabilized (for now), however the S&P 500 is still down over 4.5% year to date. Despite the weak performance of the market, my best long idea for 2016, Spirit Airlines (SAVE), is up 20% in the reference period.

With Spirit Airlines’ stock having been beaten down due to competitive pressure for rivals like American Airlines (AAL) and Southwest (LUV), Spirit Airlines was dirt cheap back when I recommended buying the stock.
Spirit Airlines has jumped almost 25% since my most recent recommendation, and I think the stock is still fairly valued and can move a lot higher. Thus, I think investors should continue holding the stock as there is likely more upside ahead.


Spirit Airlines is one of the most hated carriers in the U.S. as fliers have been frequently unhappy with its service. Given the high flight delays and cancellations, the hate is understandable. However, Spirit Airlines new CEO, Robert Fornaro, has pledged to work on customer satisfaction and should the company manage to improve the brand’s image, it could be a massive boost going forward.

I think Fornaro will prove to be a better CEO than Ben Baldanza as he is a 35-year airline veteran. Fornaro aims to focus more on satisfying Spirit Airlines’ fliers by slowing the carrier’s supercharged annual growth.

That being said, Spirit will still enter into new markets. Expansion is still important for Spirit Airlines as the company is facing stiff competition from the likes of American Airlines. Spirit Airlines will probably expand to less lucrative and less competitive markets.

Given that Spirit Airlines roughly has only one flight per day, I expect it to be successful in the new markets as well. Thus, for this reason, I think Spirit Airlines’ cautious stance on expansion and aggressive stance on improving its damaged image will prove to be beneficial for the company and investors in the long-run.


Although Spirit Airlines’ new CEO has ruled out a possible merger with Frontier, I think the company is nicely positioned to grow. The change in leadership will likely benefit Spirit Airlines in the long-run. Although the company plans to slow down its growth, I think it is still conservatively priced and can move a lot higher in the future. With a forward P/E ratio of about 10, Spirit Airlines is still cheap considering that it is a growth stock.
Published on Feb 29, 2016
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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