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Airline Stock #2 – US Airways (LCC)
US Airways (LCC) has always been a bit of a dog with fleas. The company has had numerous brushes
with bankruptcy, and the current crisis has pushed the air carrier to the brink once again.Shares of LCC dropped below $2 per share this year on fears that it would not be able to withstand a long recession. Those fears were calmed a bit
last week as the company posted a profit of $58 million or 42 cents per share. Those gains were illusory as they included one-time gains from settled
jet fuel contracts. Without those gains, the airline lost $95 million.Shares of LCC rallied on the news as investors covered short contracts or were speculating that the worst may be behind the company. Like many companies
during the recession, the “it’s not as bad as it could be” angle seems to be buoying shares.But what happens if swine flu explodes? As far as I know, there is no market taking swine flu contracts to hedge against the pandemic.
Use the gains as a chance to exit a position before things get too crazy this fall.
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