The industry inside the stock market to consider

Add an airline stock as a must buy while the coronavirus is moving. “Why might you say that? It hasn’t fallen as much as many other airline stocks over the past month”. True statement, but it does have a low-cost structure, industry-leading balance sheet, and strong record of producing free cash flow.

Air travel is a factor being stopped to a halt in the U.S. and many other countries. Due to the growing COVID-19 pandemic, the majority of the world is in quarantine. This has been the message blaring out for the past month. U.S. airlines have been sounding the alarm all this month. The COVID-19 pandemic will certainly put stress on Southwest’s balance sheet, but the airline has the financial strength to weather the storm.

There are no sure things in investing. Investors and employees are warned that revenue is plunging toward zero. This will lead to a period of deep losses and rapid cash burn. As an outcome, airline stocks have since crushed over the past month. The Arca Airline Index is plummeting 64% over for this period. Low-fare airline giant Southwest Airlines (NYSE:LUV) has fared better than most of its peers, with its shares falling low to 47% this past month.

During March, the company has drawn down the $1 billion available through its revolving credit facility and arranged an additional short-term $1 billion term loan. Thanks to this additional financing, Southwest Airlines had a massive cash stockpile of $6.2 billion as of earlier this week. Although Southwest Airlines’ stock hasn’t taken a plummet as much as most other airline stocks, it still seems like a possible opportunity for investors to profit from the recent selloff. Southwest has an industry-leading entity attached to the company. Southwest Airlines owns more than 500 unencumbered aircraft accumulated to be worth approximately $10 billion. It’s low costs and strong portfolio is a lead-way for generating free cash flow. Your cash invested in airlines should enable it to survive the current crisis and potentially gain a market share in the aftermath.