Author Topic: SAVE - Spirit Airlines, Inc.  (Read 25730 times)

Own The Rails

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SAVE - Spirit Airlines, Inc.
« on: November 18, 2015, 07:27:29 AM »
Whitney Tilson just pitched this at the 2015 Robin Hood Investment Conference. See his slides here: http://www.valuewalk.com/wp-content/uploads/2015/11/TilsonRH15.pdf

I run my university's student investment fund, which manages a small part of our endowment, and we had a successful position in SAVE last year from roughly Nov-Dec 2014. In that month, SAVE was up more than 30%, so we took the great return and cashed out. By dumb luck we avoided the drop from the $80s to $35 today. I still think the business model is great and have attached the work that a colleague and I did on it. (There's a DCF embedded in the last slide if you want a closer look at the old numbers.)

Needless to say I'm thinking of entering again. Anyone else taking a look at SAVE?
« Last Edit: November 18, 2015, 07:42:53 AM by neiljgsingh »


intothebreach

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Re: SAVE - Spirit Airlines, Inc.
« Reply #1 on: November 18, 2015, 08:45:53 AM »
Thanks for bringing this up. Tilson's presentation seems compelling. However, I'm a little far from my area of expertise (and Airlines, with its high-valued flying assets and relatively thin margins, is always just one public disaster away from taking a plunge).

At first glance, the only thing that surprised me was the significant drop in free cash flow, which seems tied in to changes in its working capital, but I haven't yet looked into the 10-Q. Do you have any idea what this relates to?

(EDIT: Corrected auto-correct's modification of Tilson's name into Wilson...)
« Last Edit: November 18, 2015, 11:24:58 AM by intothebreach »

doughishere

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Re: SAVE - Spirit Airlines, Inc.
« Reply #2 on: November 18, 2015, 10:21:05 AM »
How did mohnish pabrai do on JetBlue(i think it was)?

I have this nagging feeling that its not worth my time(headache) to even look into Spirit nor the other airlines.
« Last Edit: November 18, 2015, 10:22:45 AM by doughishere »

KCLarkin

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Re: SAVE - Spirit Airlines, Inc.
« Reply #3 on: November 18, 2015, 11:20:10 AM »
How did mohnish pabrai do on JetBlue(i think it was)?

I have this nagging feeling that its not worth my time(headache) to even look into Spirit nor the other airlines.

Not sure Monish is the right guy to ask. Maybe ask Bill Miller:
http://www.reuters.com/article/2010/12/10/us-investment-summit-miller-airlines-idUSTRE6B95OC20101210

The fun thing about airlines -- they are mostly terrible investments. Or great investments:
http://money.cnn.com/2002/10/01/pf/investing/30stocks/

See also RyanAir.

No opinion on SAVE but ULCC carriers have very different economics than the  mainline carriers. As Pabrai would tell you, if you are the lowest cost operator in a commodity business, you have a moat.



intothebreach

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Re: SAVE - Spirit Airlines, Inc.
« Reply #4 on: November 18, 2015, 11:31:30 AM »
And I think that's exactly the key here: the focus on being the lowest cost operator in an industry not exactly known for its rational competition.

Thanks for the articles by the way, Miller's view is practically the same as Buffett on this topic (I remember his joke in an AR that he has a special 1-800 number that he calls when tempted to invest in an airline, and they talk him down!)

One of the risks is that a major may be able to punish them by driving fares artificially low for an extended period of time. God knows Air Canada has done that a few times in the past around here (yet, Westjet and Porter are still flying).

Yet, at the current multiple, this seems a bet worth taking to me (albeit I'll be the first to recognize that I'm far off my usual turf).

doughishere

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Re: SAVE - Spirit Airlines, Inc.
« Reply #5 on: November 18, 2015, 12:03:39 PM »
Quote
No opinion on SAVE but ULCC carriers have very different economics than the  mainline carriers. As Pabrai would tell you, if you are the lowest cost operator in a commodity business, you have a moat.

Econ 101 right there.....i'm more interested...and thats basically what tilson gets at in his presentation.

Funny story. My mom flys spirit all the time, despite complaining(in the nice ways that mothers do) about how bad it is....hmmmm

doughishere

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Re: SAVE - Spirit Airlines, Inc.
« Reply #6 on: November 18, 2015, 12:07:00 PM »
(I remember his joke in an AR that he has a special 1-800 number that he calls when tempted to invest in an airline, and they talk him down!)

Thats the other side of the argument....



Low cost produce is the angel on my right shoulder, Buffets quote is the devil on my left shoulder.

jawn619

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Re: SAVE - Spirit Airlines, Inc.
« Reply #7 on: November 18, 2015, 03:49:53 PM »
Majority of dollars spent on airfare comes not from individuals, but corporations. If you work for a company and tickets get expensed anyway, you would likely not care about saving money. That said historical growth and profitability have been stellar.
« Last Edit: November 18, 2015, 04:41:44 PM by jawn619 »

smartone

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Re: SAVE - Spirit Airlines, Inc.
« Reply #8 on: November 18, 2015, 07:42:37 PM »
https://www.youtube.com/watch?v=kW-8X-fWEL0

Not a Cramer fan but worth watching for Spirit CEO interview

smartone

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