Southwest Airlines (LUV)
I 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.
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.