In this article, we talk about the 5 best summer stocks to buy now. In order to read our detailed analysis of these stocks and the latest market situation, go directly to 11 Best Summer Stocks To Buy Now.
5. Delta Air Lines, Inc. (NYSE:DAL)
Number of Hedge Fund Holders: 47
The increase in consumer activity in the summer months is powered by commercial jets flying millions of people to their destinations, and Delta Air Lines, Inc. (NYSE:DAL) stands to benefit as one of the most prominent airlines in the United States. It boasts many international routes, as well as hubs in many big cities around the globe.
JPMorgan analyst Jamie Baker on April 22 raised the firm’s price target on Delta Air Lines, Inc. (NYSE:DAL) to $70 from $69 and maintained an ‘Overweight’ rating on the company shares. He notes that shares in the airline sector are still 20% below 2021 highs; and apart from fuel and geopolitical tensions, the analyst sees every fundamental input as stronger than last year.
Surging travel demand allowed Delta Air Lines, Inc. (NYSE:DAL) to garner $9.35 billion in revenue for the first quarter of 2022, beating estimates by $312.5 million and signaling a boost of 125.25% year-on-year. EPS was recorded at -$1.23, also outperforming estimates by $0.04.
47 hedge funds were long Delta Air Lines, Inc. (NYSE:DAL) at the close of the fourth quarter, with aggregate stakes worth $1.14 billion. Lansdowne Partners held a $174 million stake in Delta at the end of the fourth quarter, making it the largest shareholder of the firm.
Miller Value Partners, an investment firm, mentioned many stocks in its Q4 2021 investor letter, and Delta Air Lines, Inc. (NYSE:DAL) was one of them. The fund said:
“We’ve healed greatly from the worst days of the pandemic, and we expect that to continue going forward. We see the greatest disconnects between current market expectations and 18-months-out fundamentals in names like Delta Airlines (DAL).
Delta is a quality airline with shareholder-friendly management. It was the only one not to issue equity during the pandemic. It was also the only profitable airline in the second half of 2021. It generated positive operating cash flow despite business and international travel weakness. When earnings finally normalize, which the company doesn’t expect until 2024, it should earn more than $7/share. After bouncing significantly off the lows, DAL currently trades at $41.99 or less than 6x those earnings.
We’ve believed for over a decade that the US airlines are better businesses than they’ve historically been. Consolidation led to a more rational industry. These companies shifted from growth at any cost to a return on capital mindset, the importance of which can’t be understated. We previously believed a recession would finally demonstrate the group’s improved resilience.
Unfortunately, a global pandemic did exactly the opposite. Buffett, who bought the airlines after being a critic of their historical capital destruction, sold his airlines early in the pandemic due to the risk. The government offered support to the industry due to their national strategic importance, which we believe offers protection against another worst-case scenario. We still believe Delta is a better business than the market gives it credit for and one whose prospects will be materially different 18 months from now. As patient investors, you can expect us to hold tight.”
