This post by MOI Global instructor Phil Ordway has been excerpted from a letter of Anabatic Investment Partners, based in Chicago, Illinois.
Phil discussed the dynamics of the U.S. airline industry and highlighted selected companies, including Alaska Air (NYSE: ALK), at Best Ideas 2018. Replay now.
Phil also elaborated on his industry thesis in this article.
Alaska (ALK), Spirit (SAVE), and Delta (DAL) are very different from each other, but each has a unique and differentiated approach that gives is a clear advantage over the competition. I’ll use Delta as an example in this letter since it is the newest investment of the three and one that I have not previously described.
The first half of 2018 in the airline sector was solid from an operating perspective. Robust demand and efficient operations offset some much of the recent cost inflation, but the spiking price of oil combined with worries about trade wars and cyclicality to push down the market prices of many airlines. Through June 30th, the market prices of Alaska, Spirit, and Delta declined 17.9%, 19.0%, and 11.5%, respectively, while the prices of American and Southwest suffered even more at -27.0% and 22.3%.[2]
Meanwhile the fundamentals are mixed, as usual.
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About The Author: Philip Ordway
Philip Ordway is Principal and Portfolio Manager of Anabatic Fund, L.P. Previously, Philip was a partner at Chicago Fundamental Investment Partners (CFIP). At CFIP, which he joined in 2007, Philip was responsible for investments across the capital structure in various industries. Prior to joining Chicago Fundamental Investment Partners, Philip was an analyst in structured corporate finance with Citigroup Global Markets, Inc. from 2002 to 2005, where he was part of a team responsible for identifying financing solutions for companies initially in the global power and utilities group and ultimately in the global autos and industrials group. Philip earned his M.B.A. from the Kellogg School of Management at Northwestern University in 2007 and his B.S. in Education & Social Policy and Economics from Northwestern University in 2002.
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