AMR: Expect to see multi-year high tomorrow.

BusinessWeek is reporting this evening that AMR is a possible buyout target of Goldman or British Airways. The expected deal is thought to be anywhere between 9.8 to 11.2 billion, making the shares of AMR valued anywhere from $46 to $52 a share. In response to this press release, the shares are trading sharply higher after the market to the level it has not seen in years. I expect that AMR shares will see multi-year high tomorrow when the market opens.

(http://yahoo.reuters.com...)

FilthyRich hive has initiated AMR into our core holding ideas last Nov at the price of around $32 a share. Since then, the shares have been on a torrid rise to $40 level.

(http://www.investorhives.com...)

The shares have stalled recently as the oil price has climbed back to near $60 level. The world economies are seen to be growing at a modest pace and many investors are inclined to think that oil price will be substantially higher again this year. My opinion is that as Fed officials both in the US and many emerging countries are concerned with inflationary pressures, should there be unacceptable level of energy price rise, the rate will be elevated to curb the energy price rise. As such, I do believe that oil price will be in caught in the trading range between $45 to $55. Lower price will be the tailwind for AMR and I see AMR earning growth that can support $60 share price.

(see previous message http://www.investorhives.com...)

Another notable trend is the rise in the airfare. Southwest (LUV), another stock covered in the filthyrich hive, recently hiked the airfare. This was matched by other regional and legacy carriers. Industry consolidation, higher airfare, and normalizing traffic after the cold weather as well as oil price that is likely to head lower as we exit cold winter season will portend improved business environment for all airline companies. Regardless of the takeover rumor of AMR, I like the sector fundamental enough to be an aggressive buyer at a decent pullback. I currently have $48 target on AMR and $21 target on LUV. As the sector fundamentals improve and oil price stabilizes, the TP for the both companies are likely to revise higher.


The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)

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