Jay O'Keefe says he's noticed a classic example of Jim Rogers' principle which he states, "Buy hated assets."  Jay says, "It may be the best such opportunity I have ever seen since I began following him ... airlines. If there ever was a better example, I don't know what it would be (obviously, silver at $4 would be close)."

Almost a year ago, Rogers began expressing his interest in the airlines. In a Barron's feature article dated April 14, 2008, he was asked by the person interviewing him, "Anything you like?" Here is his answer:

"The airlines, mainly international airlines like Lufthansa [DLAKY], Austrian Airlines [AUA.Austria], SAS [SAS.Sweden], Japan Airlines [JALSY], Iberia [IBLA.Spain], and all the Chinese airlines. I fly a lot and see that the planes are filling up and that the fares are going up. I also realized that Boeing and Airbus are sold out and that you can't get a new plane for five to seven years. Rising oil prices are a problem, but the airlines can pass on the cost increases."

Then, in a June 5, 2008 CNBC interview he said:

"I bought airlines today, a lot of airlines around the world today, both stocks and bonds ... Everybody is very bearish. I don’t buy things just because people are bearish … I fly a lot … the planes are full … if you ordered a new plane today you couldn’t get it for several years because Boeing and Airbus have problems.  You read every day that the airlines are cutting back their capacity.  Fares are going up. Betty, everybody knows about the fuel costs. Is there any airline left that doesn’t know we have fuel problems? They’re adjusting for it ... (re: bankruptcies) ... How much more bullish news do you want? Three or four airlines have gone bankrupt this year. That’s great news. Five out of the seven largest airlines went bankrupt during this decade … bankruptcies are signs of bottoms, not signs of tops."

Thus, Jay has reacted by making his first ever investment in airline stocks.  Jay says:

"I bought a package of seven different airlines, five from the ones named above, and two from those recommended in his book, A Bull in China, pages 135-140. I may buy one more from the book, and one more from the list above. The total package would be around 3.5%, which would put me at around 21% in common stocks, slightly above my limit allocation for stocks."

Jay is not including these purchases in his published portfolio, because it is obviously a high risk speculation and part of his variable portfolio.  Thus, it is not part of his permanent portfolio.  Nevertheless, he says it is one of the best opportunities he's ever seen. It is based solely on Jim Rogers' action. He has not seen or heard of a single other of his experts (or any other expert) that recommends it. It is the classic "hated asset," and, of course Rogers knows that. He is almost always early, which means it could go down much further before it bottoms and starts up, and there is some probability it will not work out at all.

This article is public domain.  It was compiled by Theodore Spaeth with permission of Jay O'Keefe.
This page was last updated on 16 October 2008 .