February Standout: Allegiant Travel

Each month we'll be highlighting one of our top holdings for our clients. A month of performance is obviously a very short time period but we'll dive into the stock and what they're doing and maybe why they're performing so well.


Allegiant Travel Company operates a low-cost passenger airline. They offer air travel both on a stand-alone basis and bundled with hotel rooms, rental cars, and other travel-related services. They operate just under 100 planes and service over 125 cities.


Airlines had an amazing run in February and Allegiant participated in the rally gaining nearly 40% during the month. They released earnings February 3rd and also received an upgrade from Deutsche Bank.


More broadly, in addition to the airline stocks being in favor, the re-opening stocks and value names have done very well recently. This has also played a factor in the recent runup for Allegiant.


While the earnings were not good from a historical perspective, I believe Allegiant is one of the best run airlines around. Their business model is very flexible (small airports and limited number of routes/planes which has benefited them tremendously during COVID) and their passengers are predominantly leisure, not business (which has also served them well during COVID). This played into why we didn't sell Allegiant when it dropped from $170 to $70 and looked at the long-term prospects for the company.


They did receive support from the US Treasury Department for their payroll so they are prohibited from buying back stock or issuing dividends until March 2022 but this should allow them to focus and reinvest in the business which will payoff for shareholders long-term. This summer they are launching 21 new routes to places like Key West, Portland, and Jackson Hole and many of the airports they currently serve have no route competition.


So where does Allegiant go from here? Well, short term they may be trading a bit ahead of themselves. The stock has run from below $70 per share to north of $250 per share. I think the company is an absolute gem in the airline space but I did sell some of the position near $250. A safer entry is probably below $200 in the $180 area. Most of the position we initially bought was between $110 and $140. One last red flag that the stock may have run too far too fast is the number of insiders selling. John Redmond, the president of Allegiant, has done an excellent job historically buying and selling the stock. So when he decided to take a little off the table it confirmed our suspicion that the stock may need a breather.