Penny stocks to watch 12-14-2011
Keep an eye on AMR Corporation (AMR). Its subsidiaries have been in the media lately experiencing negative press but sometimes great deals are born out of controversy. AMR operates in the airline industry. American Airlines, Inc. covers over 160 destinations through its passenger and freight service.
If AMR is declaring bankruptcy why should we keep it on the penny stocks watch list? Remember a little company called Chrysler a few years ago? Of course, if you were holding AMR at $8.00 a share from December of 2010 you might be a bit nervous at this point, but those who are looking at getting a good deal on the trading floor might consider that the 52 week high on AMR was $8.89. It is trading at $4.00 and is currently subject to intense volatility for a few more weeks as the restructuring gets underway.
If you are into charts for daily stock evaluation, check the intra-day trading charts for AMR right after the company officially filed for (Chapter 11) bankruptcy. The volatility of the stock made a lot of traders very happy for the week. The stock took an initial nose dive of $0.20 – $0.30 before it took off into the stratosphere. Similar scenarios have been noted when companies like U.S. Air or Kmart filed for chapter 11 bankruptcy.
It is possible that this volatility occurred due to closure of short positions often assumed to hedge debt instruments. This kind of volatility a short lived but also indicates that money can be made in almost any scenario. If you follow the day trading rule of catching a profitable wave on the way up, AMR might bear fruit on a breakout from its established high.
The real story with American Airlines is in that they hold $17 per share in cash. The long-term debt totals about $27 per share. The bright spot that many analysts are noticing is that the short-term debt is relatively low.
Buying American Airlines in January would have been painful. The stock fell by almost 40% during the first four months of the year. Oil gained 20% in this timeframe, and many investors worried about the impact higher fuel costs would have on airline profits. At this point, the concerns seem to be overdone, and the airlines have shown that fewer flights, luggage fees and other changes have helped them maintain profits.
This Texas based company might not be going away any time soon. American spent almost $4 million in the first nine months lobbying Washington on behalf of a myriad of causes. During the third quarter $1.33 million was used to educate Congress on a series of transportation measures. The subsidiary, American Airlines recently won a federal appeals court ruling against the Transportation Security Administration over its baggage security systems.
History has shown that it does not pay to hold a stock through bankruptcy proceedings but pay close attention to this company when the dust settles. Put AMR on your penny stock watch list based on prior performance and its historic ability to navigate regulatory hurdles. Stock: AMR (NYSE) – 52 week high; $8.89 52 week low; $0.20.
Tags: (AMR), american airlines, amr corporation
