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Will 2014’s Top Performers Keep Performing?

These three hot-running stocks won't lose their momentum in the second half

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Southwest Airlines (LUV)

Southwest LUVI hate airline stocks, but I have a hard time admitting that business and consumer travel is not booming. Hotels and online booking companies are going gangbusters. You can’t get to a hotel unless you travel there, and that means either you’re driving or you’re flying.

Southwest Airlines (LUV) has just pushed into international routes, meaning Southwest remains the go-to airline stock in my book.

LUV stock also has tripled since late 2012, and somehow an airline stock has more cash than debt ($3.5 billion to $2.2 billion). Oh, and somehow an airline stock also has free cash flow of a billion dollars.

That’s why I think LUV stock continues to move higher, even more than the 46% YTD.

Delta Air Lines (DAL) is another such “what am I thinking?” stock. It’s up 46% YTD, and again, I just point to the travel boom. I also point to the consolidation in the industry, which means there’s less supply to meet consumer demand, which leads to higher prices. I would be careful with Delta, though. While FCF was strong last year at $2.5 billion, it carries $9 billion in debt. If we get a terrible GDP number for Q2, people might cut back on travel after the summer ends. In that case, get out.

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