Airlines in Latin America are expected to lead transportation‘s surge to the upside in 2011 as those countries’ economies expand and business activity in the region increases, Lead Analyst Stephen Trent of Citi Investment Research & Analysis says.
“The way we’re looking at the space at the moment is we’re generally bullish on the airlines, and I think part of the trend there is coming from ongoing wealth creation in places like Brazil, as well as M&A both on a regional and a global level, which I think creates investment opportunities for the airlines as a group,” Trent said.
Trent’s top stock picks among his coverage of the Latin American airline sector are TAM (TAM) for the short term and Copa Airlines (CPA) in the longer term.
“Generally speaking, short term we like TAM in Brazil — the airline — and on a three- to six-month-type basis, I think, our expectations of M&A are going to drive potential gains in that one,” Trent said. “On a 12-month basis, we have somewhat more of a preference for Copa Airlines, the one based in Panama. It’s got the best airport infrastructure supporting its fleet growth. It’s got the lowest valuation multiples and yet the group’s highest margin, so we generally like that combination.”
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