The 'Cheap' Airline Stock That Beat World Peers with a 350% Rally

Daily Herald (Arlington Heights, IL), December 25, 2015 | Go to article overview

The 'Cheap' Airline Stock That Beat World Peers with a 350% Rally


Byline: Yaacov Benmeleh Bloomberg

TEL AVIV, Israel -- At first sight, investors have good reasons to shun El Al Israel Airlines shares.

The national carrier is grappling with a slump in tourism fueled by political violence, as well as intensified competition after Prime Minister Benjamin Netanyahu's government opened the market to low-cost operators in 2013. Yet the 1.41 billion-shekel ($362 million) company has a combination of factors in its favor: falling oil prices and the strength of the shekel.

The stock has increased fourfold in the past year to outperform every one of its global peers. Psagot Investment House Ltd., Israel's largest money manager, says the shares may rise at least a further 50 percent as Israelis take advantage of their increased purchasing power. The number of people taking trips abroad has risen 15 percent so far this year, according to the Jerusalem-based Central Bureau of Statistics.

El Al "finds itself in an excellent financial position," Noam Pincu, a Tel Aviv-based Psagot analyst with a buy rating on the "very cheap" stock, said in a note. "The company has an advantage in that it's Israel's leading airline, and in our assessment, the Israeli market is expected to grow faster relative to the world."

The shares have risen as the price of Brent crude sank to an 11-year low this year, cutting the price of fuel needed to run the carrier's fleet of about 50 aircraft.

El Al reported last month a ninefold surge in third- quarter earnings to $93 million, the highest three-month profit since at least 2004. The company paid its shareholders in August the first dividend since 2008. The stock rose as much as 3.2 percent, bringing its 12-month advance to 351 percent, before paring gains to fall 1.5 percent to 2.845 shekels as of 3:31 p.m. in Tel Aviv.

The performance represents a turnaround for El Al. …

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