In bear markets, airlines provide value
With a bear market looming thus far in 2016, smart investors looking for safe bets are eyeing value stocks. With favorable metrics and strong core businesses, value stocks have historically performed relatively well during major market downturns, while many other investments became even more dangerous. And there's one value stock today that looks especially ripe for the picking. AAL data by YCharts American Airlines (AAL) appears poised for at least a decent 2016. In fact, Zacks Equity Research recently called the stock "especially impressive right now." Headquartered in Fort Worth, Texas, the American Airlines Group is a holding company with wholly owned subsidiaries including American Airlines Inc. and US Airways. Through its subsidiaries, American Airlines operates an average of 6,700 fights per day. It's currently the largest airline company in the world by fleet size and revenue. And the company is checking all of the boxes for an ideal value stock. Its price-to-forward-sales ratio, which denotes how much investors are paying for each dollar of generated revenues, is 0.62. Compared to the industry average of 0.66, American Airlines appears undervalued. In addition, a low forward price-to-earnings ratio is also favored by investors and denotes a value stock. Currently, American Airlines sports a forward P/E ratio of 5.80, far below the industry average of 8.71. Dividends are also favorable indicators of a value stock. American Airlines currently pays out at a yield of 1%, which isn't huge per se. However, dividend payouts are increasing. According to a new report from Credit Suisse, American Airlines 2016 dividend forecast calls for 48 cents per share, vs. the 2015 annual dividend of 40 cents per share. And analysts at Markit are predicting that AAL will boost its quarterly payout by 25% this year. The company's dividend yield compares favorably to Southwest Airlines , which currently pays out 0.7%, and almost keeps pace with Delta Air Lines and Alaska Air Group, which are both yielding 1.2%. Over the last 30 days, analysts across the board have been raising estimates for American Airlines. On Dec. 23, Zacks raised American Airlines to buy from hold and gave the stock a price target of $48. (American Airlines is trading Tuesday around $39.). And on Jan. 18, Credit Suisse raised its price target for the airline carrier to $58 from $57. Credit Suisse has an outperform rating on the stock. Clearly, analysts are eyeing AAL as a positive alternative to the many dangerous stocks currently on the market. Lower oil prices bode well for American Airlines in the coming year. Airlines tend to realize higher prices when oil prices drop, because a key expense -- jet fuel -- gets cheaper. In 2015, tanking oil prices led airlines to experience record profits, making it the industry's best year in decades. With oil prices expected to slump even further in 2016, the industry is poised for a record-breaking year. Currently, jet fuel prices are hanging around $1 per gallon, so American Airlines is currently realizing a per-gallon savings of around $1.80. American Airlines estimates its annual fuel consumption to be 4.3 billion gallons. That would equate to an estimated annual savings of $7.7 billion this year. The markets are currently bracing themselves for a disastrous year. But in a bear market, value stocks can provide investors with a safety net. In addition, tanking oil prices indicate a record year for airline profits. These conditions make American Airlines Group worthy of investors' consideration.