Latin American carriers COPA (
) and Gol Linhas Aereas Inteligentes (
) both moved substantially higher in Monday trading; is now the
time to jump into these stocks?
[caption id="attachment_67305" align="alignright" width="300"
caption="COPA at LAX"]
Yesterday was a mixed bag for global stocks; although stocks
with Chinese exposure were hurt after the Shanghai Composite
tumbled more than 3% on fears of a housing bubble, other
country-specific macroeconomic news was much more positive. For
example, this weekend Panama reported its second consecutive year
While there may be some concern that
the economy is overheating
, for now the economy is celebrating some of the world's most
impressive growth. As a result, investors are looking for
opportunities to gain exposure to this high-flying economy through
equities with ties to Panama; Panamanian carrier COPA offers such
Not only does COPA offer investors the ability to gain from
Panama's growing economy, the company's well-placed Panama City hub
allows the company to take advantage of the overall increase in
trade between North and South America.
Although COPA dropped precipitously after its most recent
earnings report, the company is still growing and trades at
reasonable valuations; at a forward P/E of 10, this quickly
may be a bargain
. If the stock can break through resistance around $110, COPA could
head much higher.
COPA was not the only Latin American carrier to outperform in
Monday trading; Brazilian carrier GOL jumped five percent after the
company indicated that it would begin
to reduce jobs
in order to streamline operations and reduce costs.
Although GOL may have jumped yesterday, the stock is nowhere
near as attractive as its Panamanian counterpart. While COPA is
profitable and continues to expand, GOL has been forced to cut back
services as a result of a difficult operating environment in Brazil
as well as company-specific fiscal problems; future profitability
in the company over the next few quarters remains uncertain -
although it will likely see profits when air travel demand surges
during the World Cup in 2014. Furthermore, the stock could be
facing some resistance at its current levels against the 50-day
As a result, traders looking for exposure to the Latin American
aviation sector should look at the reasonable valuations of COPA
over the less compelling financials of GOL.