Editor's note: This column is an update of a portion of the "Mad Money" episode that aired June 19. Click here to read the full Mad Money Recap for that episode.
I'm about to do something I thought I would never do. I'm about to break so many of my own
rules, I'll be doing the self-flagellation thing for hours. I'm going against two decades of experience and hard work. That's right. I want you to buy an airline, and not one of these awesome Brazilian airlines. I'm talking about one of our own dysfunctional American-type airlines. If you read the book,
Jim Cramer's Real Money: Sane Investing in an Insane World
, you know I tell you that at no time, ever, should you own an airline.
These companies have just been pieces of garbage, they've been like
the dog for so long I can barely remember the last time they were worth owning. And now, guess what: I want you to buy
. This ain't an investment, let's get that straight right up front. If you invest in an airline, you lose money.
But it is a really terrific trade. I never thought I'd be saying this, but here's how an airline trade can make you money.
There's a lot going on here, but the most important factor is this "Open Skies" initiative that our government, of, by and for the airlines, has been pushing. It's not here yet, but if the Department of Transportation decides to run with it, and I bet it will, then we'll be able to ease restrictions on foreign airlines buying our domestic ones. Both
and KLM are desperate to buy.
I hate to say it, I really do, because I just despise these airlines. But Open Skies could make every single one a takeover target. I want you to buy only the best and that's Continental, because of its terrific management team and recent strong performance.
"Ah, but Mr. Cramer," you ask, "don't you tell us never to speculate on takeovers where the fundamentals aren't improving?" You know, this is one place where stereotypes can hurt you. Usually Cramer is a big fan of stereotypes, good, bad -- I'm behind them. But if you just say "all airlines are bad because that's been the truth 99% of the time in the past," you'll miss out on this opportunity. Things have changed with our airlines beyond just the possibility of takeovers from European carriers.
First off, people think fuel costs, which were killing the airlines, have peaked, so there's only upside on that front.
Second, fuel surcharges are sticking. Usually when airlines tried to raise prices because their fuel got more expensive, they couldn't keep them high, because the totally ruinous and unnecessary competition would drive prices back down.
That's because we've finally gotten rid of the competition. We've got an airline oligopoly now, and oligopolies, unlike competitive businesses, can make money. That's why all the planes are full; the competition has fallen overboard and it's not coming back. On "Mad Money," we hate competition -- it's unfair! We like non-competitive industries where you can really stick it to the consumer and bring home the bacon. Long haul, luxury flights have also started to make the airlines money, probably again because there's less competition.
The airlines have finally broken out of their endless cycle of ruinous, unnecessary, inefficient competition.
Somebody will be making that money: It could be you, it could be someone less inclined to donate it to a good cause. It's your call. I just want to enable you to make the dough.
Obviously, if you hang on to Continental long enough, the company will lose you money; it's still an airline. So how long does this trade last? I'd hold onto Continental at least until the Department of Transportation gives Open Skies the go-ahead, which could happen this summer. That should drive the stock up.
Then you probably want to hold on to the stock a little longer, until one of our airlines gets a bid from a foreign carrier. Hopefully Continental will get the bid, but even if it doesn't, the stock will go up because it will become an obvious takeover candidate and the takeover of another American airline will make the Street put a premium on the rest of them.
That's when you clear out, ring the register and never buy an airline again.
Bottom line: I'm sanctioning, for the first time ever on "Mad Money," a trade in Continental Airlines. You hold on to it until the first European -- maybe the second, if you're really into taking risks -- makes a bid for an American carrier, and then you get the heck out with your profits intact.
As originally published, this column contained errors. Please see
Corrections and Clarifications.
At the time of publication, Cramer had no positions in the stocks mentioned.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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