While the recent phenomenon of sharply diminished fuel prices may leave consumers happy and their wallets fuller at the gas pump, there have been diverse destructive ramifications on energy companies, the job market and the overall well being of economic affairs. One beneficiary of the year-long plunge in fuel prices are airlines. While some industries are taking a nose dive in these turbulent conditions, airlines are ready for takeoff and attempting to take full advantage of the favorable conditions and increased profitability.
George Soros, well-respected investor, philanthropist and manager of a hedge fund valued at $6.05 billion, has made several changes to his portfolio in the fourth quarter including an increase of his stake in Delta Air Lines, Inc. (NYSE:DAL) and a decrease in his American Airlines Group Inc (NASDAQ:AAL) holdings. Soros’ hedge fund generated a 12.23% return to investors in the fourth quarter. Let’s take a closer look into recent events potentially influencing the investment decisions of Soros:
Delta Air Lines, Inc.
Delta reported strong FY15 performance in a mid-January press release. The airline had an “adjusted pre-tax income of $5.9 billion, a 29% increase over 2014 on a similar basis.” It also reported 2015 as a “record for Delta on all fronts – with industry-leading operational performance, superior customer satisfaction, and a $5.9 billion adjusted pre-tax profit.” Delta’s 2015 performance likely influenced Soros in his choice to increase his holdings in the company.
However, the airline reported unimpressive February performance with a 5.5% decline for the month compared to performance in the previous year. While the short-term outcomes aren’t promising, the decrease in oil prices serves to increase potential for profits for the airline in the eyes of analysts. These conditions may be reflected in upcoming results of Delta.
George Soros increased his stake in Delta Airlines 60.50% in the last quarter and now holds a $100.56 million stake in the company. This investment makes up 1.66% of Soros’ portfolio. According to TipRanks, 5 analysts have rated Delta Airlines in the last 3 months and all are Bullish. The average 12-month price target for Delta based on these 5 analysts is $67.20, marking 43.13% upside from where shares last closed.
American Airlines Group Inc
George Soros recently decreased his holdings in American Airlines Group. AAL is the largest carrier in the US with the airlines under its umbrella recording more than 6,700 flights daily. This choice is in contrast to the bullish sentiments of many analysts regarding airlines in light of the current fuel price conditions.
The airline reported record $3.3B fourth quarter 2015 GAAP net profits. The airline’s “total operating expenses in the fourth quarter were $8.6 billion, a decrease of 7.9 percent compared to the fourth quarter 2014, due primarily to a 40.8 percent decrease in consolidated fuel expense.”
Despite these seemingly positive 2015 results, Soros decreased his holding in American by 5.48% in the last quarter, adjusting his stake in the company to $76.80 million. This investment is 1.27% of Soros’ portfolio. According to TipRanks, all 7 analysts who have ranked American Airlines in the last 3 months gave a Buy rating. The average 12-month price target for the airline based on 7 analysts is $51.42 marking 22.72% potential upside.