Earlier this year I said goodbye to WestJet (WJA on TSX). I realized a 40% gain on average that essentially matched the market. WJA was cheap and so was the market. I sold because I think the new CEO at Air Canada (WJA biggest competitor) is pretty smart. At the time it seemed that Air Canada’s unions and Air Canada were going to come the a compromise that would close the gap that WJA has over AC.A.
WJA was about 30-40% below my fair value target, but I was also getting nervous about the economy. Not that I have any insight on the macro side, but I noticed that market participants were getting comfortable with some of our large imbalances again. Confidence has returned and it makes me nervous.
WJA is a very well run company in a tough space. The share price may decline in a slower economy, but so will many other company’s. WJA is well followed as well. This makes it tougher for the share price to stray too far from intrinsic value.
In order for me to be interested in WJA again, I would have to see some sort of disaster specific to WJA. This would cause forced selling. I’m not too optimistic that something like that would happen though.