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Showing posts from April, 2016

Time To Sell United Airlines! Management is Destroying the Brand

Management’s overarching goal should be to maximize profits. It’s my belief that United Airlines is doing a fabulous job of this! Why then would I advise you to sell the airline’s shares which currently trade at 3 times earnings? 
Warren Buffett advises owning a company with great management. Invest in them, then leave them free to do their thing. In fact, Warren recently stated that one of the mistakes he repeats over and over is “not being willing to pay a premium for a company with great management.” In other words, he regrets being cheap and not being willing to pay a premium for well run companies.
But wait a second, aren’t you saying that United is doing a great job maximizing profits? And trading at 3 times earnings. What gives man? Why am I confused? Okay, let’s break this down into two parts.
Cheap Price to Earnings
Airlines earnings are very cyclical, and are especially correlated to fuel prices. Right now the airlines are reaping in profits as oil has dropped precipitously fro…