AMR Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of American Airlines parent AMR (NYS: AMR) fell to an eight-year low of $1.63 each, MarketWatch reports, amid fears of a bankruptcy filing. US Airways (NYS: LCC) also fell sharply.

So what: Early trading saw AMR fall more than 10%, but the stock had recovered to a 6% loss as the closing bell approached. Trading volume is slightly above average but not enough to suggest panic selling when the Dow Jones Industrial Average (INDEX: ^DJI) is trading off close to 1.5% for the day.

Now what: The seesaw pattern suggests there's a cadre of Big Money buyers who believe enough in American to prop up the shares as bears sell. Who's right? AMR's debt is now 149% of available capital. By contrast, United Continental Holdings (NYS: UAL) and Delta (NYS: DAL) report 76.4% and 79.7% of capital, respectively, as debt. The difference is stark enough that fears of AMR becoming insolvent are at least understandable, and perhaps even warranted. Do you agree? Would you buy shares of AMR at current prices? Please weigh in using the comments box below.

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At the time thisarticle was published Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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