Motley Fool analyst Matt Argersinger recently returned from the 2017 Sohn Investment Conference in New York City, where he heard some of Wall Street's top investors and fund managers take the stage to share their views on various companies.
In this clip from Market Foolery, Matt talks about Brad Gerstner of Altimeter Capital who laid out a surprisingly convincing thesis on why investors should be buying United (NASDAQ:UAL) shares, despite the recent controversy.
A full transcript follows the video.
This video was recorded on May 10, 2017.
Mac Greer: I admit I did not expect to see this name as a buy, as a stock that someone was pitching -- United Airlines.
Matt Argersinger: United Airlines. This, to me, was one of the more compelling pitches. It was by Brad Gerstner of Altimeter Capital. I have not been a fan of the airlines, and I think we've trained our brains as Foolish investors to think that industry is terrible. And it has been a terrible industry for investors for decades. But we know Buffett got into it recently. Gerstner's point is that today, the U.S. airline industry is in such a much better place than it was even 10 years ago. Right now, essentially four airlines control 80% of the revenue, of which United is a part of. That consolidation has increased load factors, revenue per seat mile, it's given airlines pricing power. He actually also thinks there's a bit of a secular growth story with airlines, in the sense that millennials, whether you believe this or not, are going to travel a lot more than previous generations. So you put all that together, and he actually thinks, in his best-case scenario, that United Airlines, within five years, could be worth $235 a share. That's if they hit his profit metrics that he has for them, and airlines in general start getting awarded the kind of multiples that railroads have been awarded, or other transportation industries. Airlines, of course, for years, have gotten low multiples, because no one likes investing in the industry. But that could be about to change. And if Buffett is behind it, and I think this case does really well, if you believe that airlines are back and they have pricing power, you could do really well. $235 for United in five years, compared to today's $78 stock price, not a bad return, if you can get it.
Greer: I appreciate the fact that consolidation has become a real thing. When I fly to Houston to see my family and friends that I grew up with, I basically have two choices if I want to fly nonstop -- Southwest or United. And I love Southwest, but when the times don't work or the price isn't right, I will fly United. And I hate hate hate that they dragged this guy off the plane, but I also don't want to be measured by my worst moment. So I'm like, they're one of the few games in town, and I'm going to play that game.