Bill Miller on Delta Air Lines
Bill Miller discussed various stock picks in a recent interview with CNBC. We discussed in the above part that he is optimistic about the cyclical sector. He has a positive view on the airline industry. Among various airline stocks, he believes Delta Air Lines (DAL) has a huge potential to provide a strong return.
According to Bill Miller, Delta Air Lines (DAL) is well positioned financially among the airline stocks. In 4Q16, its free cash flow rose ~10% compared to 3Q16. However, compared to 4Q15, its free cash flow fell 23.4%. Its operating profit margin stood at 20.6% compared to the industry median of 15.6%.
Bill Miller believes free cash flow is an important parameter in analyzing a stock. A high cash flow indicates that a company can utilize the money to:
- buy other businesses
- buy back its shares
- hire workers and do capital expenditure to expand its production capabilities
- declare dividends
Delta Air Lines is currently trading at $47.81. Its 52-week high is $52.76 and its 52-week low is $32.60. The stock returned nearly 1% in 2016, while the S&P 500 Index (SPY) (SPX) (VOO) returned 10% in 2016. Over the last two years, the stock returned nearly 5.4%. The stock is currently trading 3.5% below its 20-day moving average and 5.1% above its 100-day moving average.
In the next part of this series, we’ll analyze Bill Miller’s view on Valeant Pharmaceuticals.