Spirit Air insider buys as U.S airline stocks shrug off Coronavirus worries. SAVE has PE of 9.


Spirit Air insider Christine Richards bought 5000 shares of the discount airline despite worries Coronavirus could impact global travel. Richards was appointed director at Spirit Airlines Inc. (SAVE) in Sept. of last year. A Form 4 filed today disclosed the purchase of $216K of SAVE at $43.24.

As Executive VP and General Counsel at FedEx Corporation until her retirement in 2017, Richards filed many Form 4s dating back to 2005. But this is her first open market purchase ever as corporate insider.

News of the Coronavirus outbreak in China began impacting global markets in late January. If the virus spreads widely beyond China, there are concerns that travel-related companies’ will suffer as travelers stay home.

In 2014, the Ebola scare gave airline stocks a hit. But it didn’t last long.

Back in October of 2014, when news broke that a nurse in Texas had contracted Ebola, airline stocks took a hit as investors feared a boycott of air travel. However, those fears proved unfounded as only a dozen cases of Ebola occurred in the United States. Airline stocks soon rallied to new highs. Below is a chart of the Airline Index (XAL) back then.

In October of 2014, fears of an Ebola epidemic hit the Airline Index (XAL) hard, but the weakness was short lived. Chart: Interactive Brokers.

However, the recent Coronavirus scare has so far not affected U.S.-based airline stocks much. Based on Google Trends data for “coronavirus” search, the scare which began on around Jan. 20, peaked on Jan. 28. At least so far — experts caution that the virus is not under control and could yet spread globally. A global market selloff based on pandemic fears is still a possibility.

The search term “coronavirus” since Jan. 13. Peak was Jan. 28. Source: Google Trends
The recent low in Spirit Air Stock coincided with spike in “Coronavirus” search. Chart: Interactive Brokers

Despite the Coronavirus epidemic, Spirit Air stock has moved above its 200 day moving average.

Meanwhile, Spirit Air stock has managed to climb above its 200 day moving average (blue line on above chart). The upside traction has happened despite background worries about the epidemic.

Operations at the low fare carrier have been on the upswing. From Motley Fool on Feb. 8:

2019 got off to a great start for Spirit Airlines (NYSE:SAVE), but it ended up being a bumpy year for the ultra-low-cost carrier. During the spring and summer, Spirit suffered from a sharp downturn in its operational performance, because of an unfortunate combination of aggressive scheduling, runway closures, and frequent severe weather events. This drove up unit costs. Meanwhile, unit revenue trends deteriorated as the year progressed, because of tougher year-over-year comparisons as well as changes in the competitive landscape.

Even with all these headwinds, Spirit Airlines posted a double-digit increase in adjusted earnings per share for 2019 as a whole. The company’s preliminary guidance for 2020 implies a similar performance this year. That makes Spirit Airlines stock look like a steal at less than nine times trailing earnings.

The purchase by Spirit Air insider Christine Richards suggests she agrees SAVE is a bargain.

Contact Mark about investing based on SEC filings and smart money disclosures.


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