The Intrinsic Value of Southwest Airlines

In this lesson, the speaker discusses the evaluation of Southwest Airlines as an example of how to evaluate individual stocks. The speaker explains that the process of stock evaluation can be applied to any company, but it’s important to always relate the evaluation to the price of a stock. The speaker mentions how the airline industry has become more and more concentrated, which is not good for consumers but very good for stock investors. The speaker compares the airline industry to restaurants in a food court and highlights how McDonald’s is a top-performing company due to its real estate and branding, which gives it pricing power and higher margins.

The changes in the airline industry and its impact on the profitability of stock investors. They mention the increase in oil supply from all sands and fracking, resulting in lower costs for the industry and increased profits for shareholders. The speaker also points out the expiry of old contracts for the current staff, which used to be very lucrative, but can no longer be changed. They also highlight the mismatch between demand and supply for airlines in the US due to the lack of privately owned airports. The speaker then focuses on Southwest Airlines, which has the second-highest market cap of airlines in the US, and its unique culture of putting employees first, customers second and shareholders third. This culture has led to higher customer satisfaction and profitability for the business.