These Airline Stocks Can Add Some Lift to Your Portfolio — TheStreet — March 10, 2019

My recent recommendations of Delta Air Lines (DAL) and Southwest Airlines (LUV) appeared in TheStreet’s article, These Airline Stocks Can Add Some Lift to Your Portfolio. Here’s the text from my portion of the article:

 

Southwest Airlines (LUV) has been in the news for lots of reasons lately. The company is taking its mechanics union to court amidst longstanding enmity relating to contract negotiations. In addition, the U.S. Federal Aviation Administration has approved Southwest’s request to begin service between California and Hawaii. 

Rumors have also surfaced that CEO Warren Buffett of Berkshire Hathaway (BRK.A)  (BRK.B) might be planning to purchase Southwest — the entire company. I’ve outlined this possibility in the past. To recap, Buffett has repeatedly expressed an active desire to make a large acquisition; Berkshire has enough money on hand to buy a large company; Berkshire recently owned roughly 7% to 9% of the outstanding shares of four major airlines; and Buffett had previously identified Southwest as an airline that held his interest. 

Southwest Airlines is an undervalued growth stock. I was waiting for a pullback so that I could recommend the shares. The pullback was quick and I have now moved the stock from a “Hold” to a “Strong Buy” rating.

Delta Air Lines (DAL), with a yield of 2.8%, is a U.S. and international passenger and cargo airline with an extensive and efficient hub complex. The stock is an undervalued growth & income stock. Analysts expect EPS to grow 15.2% in 2019. The 2019 P/E is 7.7. 

Early March comments from CEO Ed Bastian reaffirmed full-year 2019 earnings guidance, citing strong spring and summer demand, and alleviating investor worries that the U.S. government shutdown had harmed profitability. In addition, Mr. Bastian raised full-year revenue guidance to a range of 4-6% growth. The most recent Thomson Reuters consensus revenue estimate reflected just 4.0% growth.

Wall Street will therefore be revising research reports to a more bullish stance, providing encouragement to institutional investors. The fundamentals look great and the stock is just beginning a new run-up. I rate the stock a “Strong Buy” in our model growth & income portfolio.

 

Follow the link to read the full article, which includes other analysts’ airline stock recommendations:

https://realmoney.thestreet.com/partner/airline-stocks-to-add-some-lift-to-your-portfolio-14891727

 

Happy investing!

 

Crista Huff

President

Goodfellow LLC

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