Please ensure Javascript is enabled for purposes of website accessibility

OMA's Sweet September

By Seth Jayson - Updated Apr 5, 2017 at 5:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Big traffic increases will mean good things for the bottom line.

Sometimes, it's just that easy. I recommended Grupo Aeroportuario del Centro Norte (NASDAQ:OMAB), known as OMA, to members of our Motley Fool Global Gains newsletter service for a couple of very simple reasons.

First, airport operators have monopolies that are rarely broken, creating a nearly bottomless moat. Next, this particular airport group had a growth story that was different from, say, more tourist-dependent Grupo Aeroportuario del Sureste (NYSE:ASR). At OMA, the potential gains would come from low-budget airlines making inroads with domestic passengers inside Mexico. The story -- which sounds a little crazy, until you ditch the "impoverished Mexico" stereotype -- was that low-cost carriers like Ryanair (NASDAQ:RYAAY) cousin VivaAerobus, could take a bite out of the big, long-haul bus business in Mexico.

And that story still seems to be coming true. This week, OMA released passenger figures that show an incredible 23.8% increase in traffic from September 2006 to September 2007. That was directly attributable to a 26.6% increase in domestic passenger traffic owing to new business from carriers Aladia, Alma, Avolar, Interjet, VivaAerobus, and Volaris.

International traffic, from carriers such as UAL's (NASDAQ:UAUA) United, Alaska Air Group (NYSE:ALK), AMR's (NYSE:AMR), American Airlines, Delta, and Continental Airlines (NYSE:CAL), contributed to a smaller, but still very healthy, 8.3% increase.

Thus, the payoff theory is very simple. Relatively fixed costs (the airports) taking in larger numbers of passengers -- who pay tariffs and spend money on things like food, parking, and car rentals -- will eventually leverage into growing margins and great cash flow.

That's why I still like OMA's shares, and hold them myself, even though they've tacked on some 30% (beating the S&P 500 by nearly 20 percentage points) since I recommended them at Global Gains. Investors looking at a long-term hold will likely do fine even from today's higher prices, but because storms and short-term system burps like airline pullouts can cause significant turbulence, it's also a good idea to keep some money on the side, and wait for shares to become an even bigger bargain.

At the time of publication, Seth Jayson, a top-10 CAPS player, had shares of ASUR and OMA, but no positions in any other company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. Stock Quote
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
OMAB
$54.61 (0.37%) $0.20
Alaska Air Group, Inc. Stock Quote
Alaska Air Group, Inc.
ALK
$46.55 (-0.79%) $0.37
Ryanair Holdings plc Stock Quote
Ryanair Holdings plc
RYAAY
$74.00 (-0.23%) $0.17
Grupo Aeroportuario del Sureste, S. A. B. de C. V. Stock Quote
Grupo Aeroportuario del Sureste, S. A. B. de C. V.
ASR
$199.50 (1.13%) $2.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.