In 2013 Air Canada’s (OTCPK:ACDVF) stock was trading at a mere C$2 a share, and was deemed by many to be a bad investment. As often happens the contrarians partied over the next year. On July of 2013 the company launched an investor’s day which was so successful it launched the stock C$2.0 up.
How has the stock fared since then? Very well in fact. In fact those who jumped on the wagon in 2014 are now looking at return of nearly 100%. The most recent investors’ day on June 5th, 2015 by which point the stock was trading at over C$14.
Much of the increase in value can be attributed to the sharp decline in oil prices – which of course served as a huge boost for all airline companies. However, the company claims that the improvement can be largely attributed to a 15% in non-fare revenues in services such as cancellation fees, seating selection, baggage check in etc.
If you are looking for an Airline ETF you might be out of luck as the Guggenheim ETF, which had FAA as its ticker was the only pure airline ETF. Another option which holds 25% of its equities in airlines is SPDR S&P Transportation ETF (XTN); however, watch out as a major portion of the portfolio is allocated to small caps which make it particularly volatile.
This is an opportunity as oil might be significantly oversupplied again. If Iran’s sanctions are lifted you can be sure they will pump out as many barrels as they can into the market. This will bring a huge increase in supply and inevitably cause prices to further decline. Secondly China is believed to be the major source of the recent increase, while the resupplied their stocks. If those are capped out demand is likely to experience a downturn again.