The air travel industry could do very well over the balance of 2013.
As travel has increased in the past year, airlines have been cutting the number of flights. That means planes are leaving the gate closer to capacity and thus lowering all-important fuel costs, helping to pad the bottom line. Add on food and beverage sales and baggage fees, and I see a lot of factors a helping to drive top- and bottom-line growth. As the economy continues to grind out a recovery, prospects for the airlines should continue to brighten.
But even in an industry with solid near term prospects, it is important to differentiate between the stocks with great fundamentals and those that are just along for the ride. Owning the best stocks in an improving sector is the way to beat the market by a wide margin. Fortunately, we can use out Portfolio Grader tools to pick the very best stocks and avoid the “also-rans” that will offer more mediocre returns.
Allegiant Travel (ALGT) is a specialty airline offering low-cost travel to leisure destinations. The airline allows residents of smaller cities to fly to such places as Florida, Arizona and Nevada without the expensive connecting routes of major airlines. The company also offers bundled vacation packages with hotels and rental cars in addition to air travel. Allegiant has reported earnings in excess of analyst estimates for four consecutive quarters, and the expectations for the rest of the year have been increasing steadily. Management recently announced a $100 million share buyback that should provide additional support for the stock price. The stock has been rated buy or better for the past year and remains rated “A” and is considered a “strong buy.”
Copa Holdings (CPA) is a leading passenger and cargo airline in Latin America. The company offers 340 daily flights to destinations throughout the region, including the Caribbean. Copa is seeing increased demand for its services, revenue growth has been strong, and profits are climbing by more than 15% annually. Much of Latin America is growing faster than the rest of the world right now, and Copa has aggressively expanded in the region to take advantage of the opportunities. The company has increased capacity by more than 50% in the past two years, which is paying off in rapid earnings growth. Portfolio Grader upgraded the shares to “A” back in November and the stock remains a “strong buy.”
The airline sector should be strong for the rest of the year, and the airlines with the very best fundamentals should lead the way. Keep using Portfolio Grader to identify which stocks will lead the charge.
Louis Navellier is the editor of Blue Chip Growth.