I did not believe airline stocks could rebound ever since 9/11 and its aftermath shook America and the world. Though Americans still fly for travel and business at high rates, the elevated cost of oil, the airlines #1 cost, further proved money could not be made on these union raping (cough. Northwest. cough) airline firms. Then the earnings came out with Continental and Southwest posting 17% gains in revenue. A well lit sign that five years of sinking margins and frightened passengers were over.
The airlines should remain profitable as long as foreign conflict remains at ease and energy prices stay put. Continental (CAL) shares are up 7% today and won’t stop there. CAL is hovering above its 52 week high, and usually when this occurs, we never buy. But wait, there’s more. Continental’s forward P/E stands at 10x future earnings making it very cheap. Buying some shares is a great idea because Continental stock is very strong at the moment. Continental Airlines should do well over the next quarter.
If you’re a long term investor, then go with the best of breed company, Southwest (LUV). While US air struggled to pay the bills and Northwest fought off its employees, Southwest made and continues to make cold hard cash. Take a position in LUV and hold your shares, but do NOT marry the stock. Remember natural gas and crude oil won’t be cheap forever.
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