Find out who bought JetBlue stock

There aren’t many chances in the market like this when a sophisticated investor like Carl Icahn, with his track record of successful transactions, comes to take a public interest in a stock. Known as activist investing, Icahn will acquire a significant stake in a stock, large enough to give the investor some control over the company.

This time, the activist investor decided to look into JetBlue Airways Co. NASDAQ: JBLU with a controversial entry into a sector with negative sentiment. However, no one needs to make money by following the consensus. Many favorable factors push airline stocks, causing some of the reasons behind the big buying in the name.

However, if you think buying the news is sheep’s play, it’s not too late to get in on the big push this sector may soon experience. Today, MarketBeat brings you a suite of solutions to this particular situation, in which you might decide to follow Icahn in the hunt for JetBlue or even consider a secondary deal in American Airlines Group NASDAQ:AAL.

Why start looking?

Starting from the top, today no one is really interested in the airline industry; perhaps some markets were stuck in the past, when months of rising interest rates began to dampen consumer travel and consumption trends. Oil prices, like interest rates, are not at the same level as when the sector was in sharp contraction.

The Fed has proposed cutting interest rates this year; you can time incoming changes by following the FedWatch tool on the page ECM Group NASDAQ: ECM to find that most traders expect these cuts to arrive as early as May, but the money moves before the economy.

As interest rates fall, travel and leisure could quickly see a turnaround towards newfound expansion; combined with currently low oil prices, airline margins are looking better and better.

THE US Global Jets ETF NYSEARCA: JET it began outperforming the broader S&P 500 index by as much as 9.5% in the latest quarter, meaning momentum is intensifying in the sector.

Furthermore, according to the latest employment situation report, the transportation sector (the one that in a sense supports airline equipment) has added up to 5,600 jobs in the last month. The same space has shown expansive activity over the past month after previously being contracting, a trend you can track in the ISM manufacturing PMI index.

If this isn’t enough of a factor to get your attention to the sector, consider that it is trading at 68.5% of its 52-week high prices as an average of all peers.

Wall Street defines a bear market as a retracement of 20% or more from high prices; you can assume that you will get a discount in this space.

JetBlue’s Choice

As a true activist investor, Icahn took a hard look at the airline industry and decided to stick with JetBlue for a good reason: that reason is value. While most of the sector trades at an average price-to-book valuation of 1.9x, JetBlue stock shines.

With its multiple of 0.7x, JetBlue enjoys a 63.8% discount to the industry. All this comes as analysts expect the stock to grow its earnings per share by as much as 88.7% over the next twelve months, where its closest competitor in the domestic airline industry, Southwest Airlines Co. NYSE:LUVit made just 36.6% on its projections.

Southwest trades in line with the industry average at 1.9x P/B, slower growth without discounts. How about another noteworthy one, like American Airlines?

While not predicting growth like JetBlue would have next year, American Airlines analysts thought it appropriate to expect EPS growth of only 18.7%; however, these same analysts may have reason to believe that the stock could prove that these projections are conservative.

Analysts at Citigroup Inc. NYSE:C raised its price targets on American Airlines to $20 per share, which projects a 36.9% rally from where the stock is trading today. JetBlue analysts see a 28.8% downside in its $4.90 price targets, so siding with Icahn might be a bit of dark science for your wallet.

Siding with more accepted growth, like American Airlines, may be a better bet than the likely discounted growth seen in JetBlue. Either way, the sector is expected to recover soon.

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