Which airline goes next?

A week or two ago I heard a stock pundit talking about legacy carriers, traditional US-based airlines like AA as a contrarian stock pick. Maybe, but how do you pick one that’s not about to go out of business?

Independence Air (FLYi) has flown its last flight, but Southwest and Jetblue seem to be doing better than the legacy carriers and this is reflected in their stock prices. A profitable US airline is so exciting that JetBlue Airways Corp. (JBLU) is trading with a PE of 97 and a 1 year estimated forward PE of 77. Southwest Airlines Co. (LUV) has a more attractive PE around 26 with a forward PE of 24.

AMR Corp. (AMR), US Airways Group Inc. (LCC) and Continental Airlines Inc. (CAL) are losing money while ticker symbols say it all for DELTA AIR LINES INC (Other OTC:DALRQ.PK) and Northwest Airlines Corp. (NWACQ.PK).

Contrarian picks? Certainly. Good investments for a retirement nest egg? No. Airline stocks are trouble because they can’t control geopolitical uncertainty or oil prices. Both of those things can wreck profits. The US based legacy carriers are in a mess to begin with…

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