British Airways ready to take off

What is the best thing to do when the market is tumbling and everyone is running for cash? If you are crazy like me then you sell a stock that is holding up and buy a bargain.

So yesterday I sold half my Google position and bought into British Airways. There are plenty of bargain banks around as well but even I am not crazy enough to increase my exposure to banks in the current climate.

Google has been relatively untouched by all this market uncertainty while BA is down over 30% since the start of the year for a variety of reasons.

BA is on a 2007 PE of less than 8 and is about to resume paying dividends. As for growth - well this is an airline! Lets just hope Bin Laden leaves it alone.

What do I like about BA?

- Bargain basement valuation
- £2 billion in cash
- CEO Willie Walsh is keeping a close eye on costs
- Modern fleet
- Strong brand
- S & P has upgraded its debt to investment grade
- Should yield over 2% now dividends are resumed
- Moving into new terminal at Heathrow next year. This will put an end to changing terminals for connections.

What do I not like about BA?

- It is an airline!
- Subject to intense competition, especially in the short haul market
- Exposed to terrorist events
- Will be hit hard in a recession

I think BA has the potential to hit 500p in the next year, giving it a 30% upside.

BA has been good to me in the past; hopefully it will produce the good again.