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GOL airlines: a stock I like to own, although I lost 15% on it July 17, 2006

Posted by deminvest in GOL, growth stock, Single stocks, stock I own, stocks.
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GOL is becoming cheaper as this low cost airline performs greatly.

I lost 15% on it, but I have no regret. June flight data for GOL were amazing and the company is continuing to grow fast, with lovely earnings, without debts and even with dividends, which are a nice gift that very few growth stocks offer:

Those are the flight data for GOL in June 2006 compared to June 2005:

month June 2006 June 2005 (%)
RPK (mm) (1) 1,235.1 770.5 60.3%
Load Factor (2) 77.3% 71.1% +6.2 %.

(1) Revenue passenger kilometers represents the numbers of kilometers flown by revenue passengers.

(2) Load factor represents the percentage of aircraft seating capacity that is actually utilized.

They have 60% more kilometres flown by paying passengers. This is what I call growth for an airline!

What is also very nice is that they have loaded each airplane with 6% more passenger, leaving fewer seats empty.

Even with those bright results, GOL price went down 15% since I bought it, probably because of oil prices and higher rates. But the company is so healthy that oil prices and high rates will hurt its competitors much more than GOL, giving GOL more opportunities to gain market share.

GOL has plenty of cash and no debt, so high rates will hardly bother it. Not the same can be said for its debt burden competitors like Varig, which shall pay more and more interests.

Oil price is not nice for any airline, but low-cost GOL is doing a great job in loading its airlines. Paying high oil prices is a drama for airlines which have to pay higher gas bills to fly half empty airplanes.

 

Let’s give a look at some nice figures for my beloved GOL:

Qtrly Revenue Growth (yoy):46.50%

Qtrly Earnings Growth (yoy):42.90%

Total Cash: 411.79M

Forward Annual Dividend Yield: 1.40%

Payout Ratio: 7%

The last two ratios tell us that this healthy airline gives out 1.40% dividend yields, using only 7% of its earnings. What happens with the other 93% of the earnings? We can guess that it goes to buy new airplanes, to invest in marketing, to open new routes and into the banks to increase the cash amount this company owns. Do you like that fellow proletarian investors? Well I sure do love it!


Comments»

1. len - July 23, 2006

what do you think of the escalating oil price triggered by the war in the middle east and the decision to be buying stocks at this time?

2. deminvest - July 24, 2006

I think that raising oil prices can hurt stock markets in several ways:
1) Consumers spend more money on gas and less on other goods
2) Rising oil prices —> bring inflation which —> convinces the FED to raise rates.
3) Some kind of companies (GOL is among them) use up lots of gas. Higher prices can hurt their earnings.

I don’t think this particular war can hurt too much oil prices. It is among two countries which do not have oil.

Anyway it is time to buy only on a strict monthly budget, which can be reasonably sustained for 10 or more years.

Mine is $1000 a month. By this system, if markets will go further down I will buy cheaper and cheaper until someday, like they always did, they will point up again.

3. len - July 25, 2006

thanks vado for taking time to explain. so far what i got are guaranteed funds on a no load arrangement which i hope will not be hurt so much with minimum share of only 5000 USD. i hope the market picks up again in due time as u optimistically point out.

4. deminvest - July 25, 2006

Maybe it happening now Len🙂

5. deminvest - February 14, 2007

I think that by “total cash” in this article is meant the difference between cash and debt.


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