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Delta Air Lines: Goldman Sachs Expects It to Outperform

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Jun. 5 2019, Updated 9:52 a.m. ET

Delta Air Lines

Delta Air Lines (DAL) shares rose 4.2% on June 4. Goldman Sachs (GS) said that the stock will likely outperform the broader market despite global trade concerns. On June 3, Goldman Sachs released a list of 12 crowded stocks. The stocks are popular and heavily held by hedge funds and mutual funds.

In the US Weekly Kickstart report, Goldman Sachs said, “The underperformance of popular positions today following President Trump’s announcement of tariffs on imports from Mexico underscores investor concern about crowded positions,” according to Investopedia. However, Goldman Sachs argued that “despite posing a tactical risk, concentrated ownership has generally been a positive signal for subsequent stock returns.”

Delta Air Lines is on the list even though the stock has underperformed the broader market. The airline has returned 8.8% YTD (year-to-date). In contrast, the NASDAQ and the S&P 500 have gained 13.4% and 11.8%, respectively.

The stock has also underperformed the iShares Transportation Average ETF (IYT), which invests in US transportation stocks. IYT has allocated 16.7% of its funds in the passenger airline industry. IYT has gained 10.3% YTD.

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The stock’s YTD gain is higher than most of its peers, which have registered negative or flattish returns. Delta Air Lines had back-to-back quarters with impressive financial results. The airline is benefiting from its strategy of adding more premium seating capacity, cost-cutting measures, and the One Delta initiative.

Other stocks on Goldman’s list

Apart from Delta Air Lines, Goldman selected 11 other stocks that are currently hedge funds and mutual funds’ favorite. ServiceNow (NOW), Mastercard (MA), PayPal (PYPL), and Visa (V) are on the list. These stocks’ YTD gains are 44.7%, 32.1%, 29.3%, and 23%, respectively.

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