Southwest Airlines Co. (NYSE:LUV)

Buy on dip

Best of the US airlines.

Wright Amendment goes away, fundamental company philosophy towards employees.

There is always something dragging airlines down. Even this well run company.

less airlines , less seats, mean higher profits

Pick based on Trefis analysis as of 2/7/13

Southwest is a solid company which will continue to thrive as larger national carriers continue to struggle.

Great company.

I feel it.

Positive:
- Best of the airlines (but still an airline ...)
- Their size allows them to effectively compete on prices which is the overriding issue for customers
- They might be able to further take market share from competitors
- Inexpensive and with some short term momentum, usually a good combination
- Very good management

Negative:
- It is an airline and we might be on a cyclical top

Category: R13BRm

Airline industry undervalued. I like Southwest alternative approach. I'm long, stock will double in the next few years.

Invented the budget airline, the other guys are still trying to figure it out.

I understand this company is an airline.

If 2012/2013 estimates pan out, current price is a steal

The following was stolen from "Seeking Alpha". In addidtion to this rationale for buying LUV, I love LUV...been in & out over the years.Southwest Airlines' six-month moving average is currently $8.88 and it has been flirting with that average since the beginning of 2012. In my opinion, a position here is relatively cheap, and while it carries a small measure of risk, it could pay off greatly if Southwest is able to break its six-month moving average, sending it into a bullish run for the rest of the year.

In the long, long run all airlines make bad investments. As Buffet has famously said in the past, no industry has been more efficient at destroying shareholder capital then the airline industry.

Despite ample empirical evidence supporting this conclusion, investors keep foolishly throwing capital at this industry thinking this time, or this airline will somehow be different and avoid the terrible and unescapeable economics inherent in this industry.

Airlines, in general, have everything that you *DON'T* want in an investment.

Namely:

(1) Organized labor. (Granted this is not so much of an issue for LUV)

(2) Very high and recurring capex.

(3) Intensely competitive. The dawn of the internet age has made pricing almost completely transparent and commoditized the entire industry along price lines.

(4) Poor pricing power.

(5) I saved the best for last (and this is related to #4) - Huge exposure to fluctuations in the price of oil.

This last one is enormously important at the moment and I don't care what anybody says, the exposure to higher oil prices due to an imminent confrontation with Iran is not anywhere near being fully priced in to the market or to this stock.

Buyer beware.

All airlines, no matter how well they are run end up in bankruptcy eventually. LUV's journey getting there is just taking longer then most. Look at the stock price performance since 2000 to see what I'm talking about. This firm is just on a VERY slow grind to eventual bankruptcy reorganization in simpathy with the world's dwindling supply of affordable oil.

Once they go into chapter 5 or 10 years from now they will end up on the same senseless merry-go-round in and out of bankruptcy that all their larger peers find themselves on. The next oil price shock is never more then 5 years away and this will never change.

An as far as I'm aware, unlike with automobiles, I don't believe any credible alternative fuel source is available to power airplanes. Perhaps any one of the numerous engineering folks in the Motley Fool community can rebut that last point. I hope I'm wrong about it.

The problems of AA, along with the end of the Wright amendment and the acquisition of AirTran, will drive increasingly market share and pricing power. The more important advantage of SWA, overall, is the corporate culture which is unique in the business world. Ultimately, SWA will be more productive with this culture than its competitors.

The only airline that doesn't suck in the eyes of its passengers.

The stock has been in the doldrums for several years now, and I honestly don't see anything on the horizon that's going to change that. The business model is sound (well, as far as airlines go), but where's the growth? Where's the catalyst that pumps the stock price? I just don't see it.