Easyjet and how to become a millionaire

30th Jun '16 by Whitbyview

8 comments 7405 reads

So Richard Branson seems to have had the right idea on this one in terms of becoming a billionaire first and then buying an airline. Well, that is what I think holding a small number of easyJet (LON:EZJ) shares. I have read the news release from the other day and I understand the issues facing this share generally and with Brexit but I can't help but feel that it's been treated quite harshly by the market. There has been no bounce in these shares so far, unlike for many banks and builders. Is it really that gloomy or is there some value here? I'm thinking of buying some more but was interested to hear if anyone had any insights. Thanks in advance.

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About the Author

Whitbyview

Premium Member

8 comments

dlaw

3rd Jul '16

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

— Warren Buffett, annual letter to Berkshire Hathaway shareholders, February 2008.

Whitbyview

3rd Jul '16

Thank you. Wise words indeed. Airlines could be in for more pain but it's a question of how much relative to the market as a whole. So much is in the air right now - no pun intended.

Flackwell

4th Jul '16

If they do relocate overseas then do the right thing - and boycott them

jonno

2nd Oct '16

I am a great admirer of Warren Buffet who is rightly recognised as one of the great investors, but there are always exceptions to any rule. Regarding airlines Ryan Air and EasyJet have been fabulous investments in recent years, as has Dart, all of which are enduring more challenging trading conditions at present. How long these will continue I have no idea. However people are not going to stop flying and more pertinent questions regarding EasyJet I think are:

Is it a good business with an advantage over most other competitors - my view is yes to both.
Is it well managed - again my view is yes
Is it financially solvent and can it afford to maintain its dividend - yes

On the downside airlines are capital intensive and subject to geopolitical gyrations. But the time to buy something of value is when no one wants it. Whether EasyJet now offers compelling value is a matter for the individual. It may well do but I think waiting for the trading update later this week might be the thing to do before deciding whether to top up.

For what it is worth I hold a relatively small number of shares and intend to continue to do so until there are positive signs that the gloom is starting to lift at which time I will likely add to my holding, funds permitting. As ever it is down to the individual investor.

Good luck

PhilipHanson

3rd Oct '16

Just a quick reminder that in Stockopedia figures, easyJet (LON:EZJ) Free Cash Flow includes dividends paid and therefore FCF is actually much higher than stated. Details here: http://www.stockopedia.com/content/dividends-shown-in-operating-cashflow-102340/

MichaelFBS

7th Oct '16

I held Dart (LON:DTG) from 154p all the way up to 675p and fortunately pushed the sell button at 476p on the way down with 105% profit. I had bought on the way up at 253p and 270p.

Since them they have fallen further and this morning have hit 390p. I would not touch a local cost airline with a bargepole at the moment for several reasons:

- oil in sterling terms is increasing in price as the currency weakens. If we hit $1.10/$1 as many are predicting then this is a huge increase in cost.
- oil I suspect is increasing over the next few years in dollar terms
- Leaving the EU will increase costs for all uk airlines operating in Europe
- Europe is already a more expensive place to travel and I am as certain as I can be that this will reduce overseas travel. Yes it will be compensated to some extent by inward tourism but not to the same extent.

I definitely would not be picking up any at the moment.

jonesj

7th Oct '16

I have never bought an airline stock due to my "no airline stocks" rule. Although I cannot guarantee I will stick to that for ever.
I have purchased airport stocks in the past, since these are a much more secure & monopolistic proposition. BAA did very nicely.

andrewdb

7th Oct '16

As others have said, there is (at the moment) no way one airline co can get a durable competitive advantage over any other.
Worse, imo, that there is no way encourages extreme risk takers and possibly worse - dodgy financial engineering.
Any business sector like this (supermarkets look like they are going this way) may give you a nice return in the short run, but at some point the music stops and the lights come up and you find yourself clutching a load of old Tesco/Fastjet/etc

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Easyjet and how to become a millionaire

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Whitbyview

8 comments

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