Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Wallace Rivers who wrote (29938)	1/31/2008 6:01:12 PM
From: Paul Senior	Read Replies (5) \| Respond to of 78476

What would be the attraction at LUV at current price? Ha. I believed LUV to be a decent bet at an even higher price, but I can not now remember why -g-. (Took a loss in it last year.)

To: Wallace Rivers who wrote (29938)	2/1/2008 8:42:45 AM
From: gcrispin	Respond to of 78476

A recent article about LUV in Barrons: AS SHARES OF Southwest Airlines try to take off from their lows, two insiders at the company have sold $725,000 in the Dallas-based company's stock. On Monday Chairman of the Board Herbert Kelleher sold 50,000 shares for $604,500, an average of $12.09 a share. Kelleher, who has served as chairman since 1978, continues to own three million shares directly, and 300,280 shares indirectly through a family limited liability company. Also on Monday President and director Colleen Barrett sold 10,000 shares for $121,000 or $12.10 a share. Barrett continues to own 43,576 shares directly and 1,474 shares indirectly through the company's profit-sharing plan. Neither owns more than 1% of the company's stock outstanding. A spokesman for Southwest declined to comment on the sales other than to say that they were due to routine diversification purposes. "The selling isn't as bad as it looks from the headline," says Jonathan Moreland, adviser to Ladenburg Thalmann Asset Management on insider strategies. "The chairman still owns a lot of shares and the president did have an options exercise earlier in the month." "However, given the decline the stock has seen, I'm surprised there isn't more buying," Moreland says. "Yet this is a pattern you see at airlines over the years: The stock goes down and instead of buying we see more selling, [perpetuating] a negative insider profile. Add to that rising fuel costs, cutthroat competition and a potential decrease in demand…and the macro aspects of this industry have not been attractive." Southwest dropped to a 52-week intraday low of $11.02 on Jan. 9, and aside from a slight postearnings-report bounce, the stock has continued to hover around that level. Shares slipped 16 cents to $11.72 on Thursday. While most airlines were reporting fourth-quarter losses, on Jan. 23 Southwest said income soared 95% to $11 million, or 15 cents a share, as fuel hedges saved the company $300 million in the period. Analysts polled by Thomson Financial had predicted the company would earn only 10 cents a share. Yet the company's greatest advantage over rivals, its fuel hedges, won't last forever. While 70% of Southwest's 2008 fuel costs are covered by options, by 2010 the company will only be able to buy 30% of its fuel for a discount. The company has said it plans to offset fuel costs by a possible fare hike and a reduction in the number of cheap tickets it sells. Southwest, the leader in domestic airline traffic, hasn't reported a quarterly loss since 1991. However Chief Executive Officer Gary Kelly warned that the company could dip into the red for the first quarter. An economic downturn is also expected to hurt airline traffic; the International Air Transport Association, an industry trade group, has already forecast that international passenger and freight travel will slow in 2008. Still analysts remain bullish on the company. Those surveyed by Thomson Financial on average rated the company a Buy or the equivalent with a 12-month target price of $14.96. "The company is in a transitional year," says analyst FTN Midwest Securities analyst Michael Derchin. "It is becoming a more balanced airline as it shifts from being 100% focused on price-sensitive leisure travelers. Southwest has a series of programs, such as in-flight Internet access, designed to attract new business travelers to Southwest who will pay a premium for those services." Derchin is unconcerned about the possible first-quarter loss and notes that Southwest still has one of the best fuel-hedging programs in the industry. Many investors are bullish on the airline sector in general, due to the possibility for consolidation. "I don't see Southwest being involved directly in any mergers until possibly 2009 or 2010," says Derchin. "However, they could benefit by getting slots in gates at airports that larger airlines have to give up to get approval for mergers. The continuous downsizing of domestic operations by larger airlines will also help Southwest." Derchin has a Buy rating on Southwest and a $20 target price