Up another 8% in a week! So what’s stopping me from buying IAG shares?
Is there no stopping International Consolidated Airlines Group (LSE: IAG) shares? It doesn’t look like it.
The British Airways owner is up another 8% in the last week. It’s up 22% over one month, 64% over three months and a massive 145% over the year.
It may be an airline stock, but it’s behaving like a space rocket. No pilot would allow a passenger plane to climb at this speed.
Which poses a problem for investors like me. Momentum stocks always do. There’s a risk that I hop on board, just as they stall. Then drop.
This is the first FTSE 100 stock I want to buy
This has happened to me a lot lately. Even FTSE 100 defence manufacturer BAE Systems, which I once described as the ultimate no-brainer plunged days after I added it to my portfolio last March. I’m still down 10%. In today’s dreadfully warlike world, nobody should lose money on BAE. I have. On paper.
I’m almost too ashamed to admit I bought Nvidia shares for the first time on Friday 17 January. On Monday 27 January it suffered the single biggest stock market loss in US history, falling $600bn as DeepSeek threw down its cut-price gauntlet. There’s no hope for me.
And I’m not going to share how I fluffed the Rolls-Royce growth miracle.
Despite those dire omens, I still want to buy IAG today. I think there’s plenty of fuel still in the tank. The IAG share price still looks good value with a price-to-earnings (P/E) ratio of just 8.6 times.
Yes I know that’s roughly double the P/E of three or four times it traded at a year ago. But it’s still roughly half the FTSE 100 average of 15 times. Which isn’t bad given that it’s the highest flyer on the index over the past year.
I think there’s more growth to come
The early rapid growth stage is over. I’ve missed that, I accept it. Pandemic lockdown hell is now a fading memory. Although it has left IAG with roughly €6bn of debt. That will take a few more years to whittle away.
Airlines are highly sensitive to economic conditions. If a recession hits, demand for air travel could plummet, hurting revenues and profitability. We’re waiting to see how Donald Trump’s mooted tariffs could hit business growth – and their transatlantic travel plans.
Fuel price volatility is a constant concern. Carbon taxes and emissions targets could drive up operating costs. IAG faces a tough balancing act between improving service quality, especially at BA, while competing with budget carriers on price.
Yet I can’t argue with its momentum. Only one thing is holding me back, and no, it isn’t my experience with BAE, Nvidia and Rolls-Royce. I just haven’t got any cash in my trading account.
So I have a second decision to make. Which stock to sell? With the FTSE 100 breaking new all-time highs, I don’t want to ditch anything. Although I’ve got my doubts about spirits giant Diageo…
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Harvey Jones has positions in BAE Systems, Diageo, Nvidia, and Rolls-Royce Plc. The Motley Fool UK has recommended BAE Systems, Diageo, Nvidia, and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
