Airlines had a sharp decline today. I have been looking at a few names in the sector: Spirit Airlines (SAVE), JetBlue Airways (JBLU) and Southwest Airlines (LUV). Today teaches us again why we shouldn't be chasing a good stock while it is going up. It is down days like today that keep happening once in a while and present a good discount to buy our favorite companies. Since JBLU announced a decent quarter the stock ran up and I couldn't pull the trigger. Once it was already up, I didn't. With today's decline it is back to pre-earnings level. This is an example of how the market behaves irrationally sometimes, presenting opportunities for us.
Consider Spirit Airlines (SAVE) for a moment. This has been a terrific company and stock. The chart below shows how it has been growing its revenues and earnings consistently year over year. This is the reason why the expectations became too high from the stock and it fell sharply on even a slight concern in the recent conference call. Today it fell another 6.68%. In December 2014, this stock was trading with a PE of 23x. That was still a PEG of under 1, as analysts are expecting a 22% growth rate over the next 3-5 years. Now the stock trades at a PE of 17.8x. Mr. Market is again presenting us with a great opportunity to own a growth stock at a reasonable price (GARP). I might pull the trigger over the next few days. It is on my radar.
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