‘Not All Airlines Are Created Equal': Two Stock Traders Give Their Favorite Picks

Southwest Airlines Boeing 737 MAX aircraft are parked on the tarmac after being grounded, at the Southern California Logistics Airport in Victorville, California on March 28, 2019.
Mark Ralston | AFP | Getty Images

Are any airline stocks worth buying on sale?

Two traders grappled with that question on Tuesday as the group slid on concerns around a fuel shortage stemming from this weekend's cyberattack on a major U.S. pipeline.

The U.S. Global Jets ETF (JETS), a basket of 39 airline stocks, ended trading down more than 1.5% on Tuesday. It is down about 8% from its recent highs made in March.

"Not all airlines are created equal," said Nancy Tengler, chief investment officer at Laffer Tengler Investments.

"Southwest is in a unique position to come out of this stronger," she told CNBC's "Trading Nation" on Tuesday, noting the company's "strong history in hedging oil prices."

Southwest has hedges in place that become profitable when crude oil prices reach $65 and $70-80 a barrel. Another "really aggressive hedging program" will begin in 2022, Tengler said. Crude oil prices rose to just over $65 a barrel on Tuesday.

Southwest also announced that it will start hiring new flight attendants for the first time since before the Covid pandemic put a pause on the economy on account of strong demand.

"Once the pipeline gets back on track, this is a company that you would want to take advantage of the weakness in because it's going to be a strong medium and long-term player," Tengler said. "Mostly leisure travel. Doesn't need to wait for business travel to come back. We're owners and we would be buyers in here."

Southwest found another fan in Bill Baruch, founder and president of Blue Line Capital and Blue Line Futures.

"I'm very bullish on crude oil. I think crude oil can get to $100 over the next 18 months and I think that's going to be a headwind down the road for airlines. Southwest is very good, very well positioned in that given their hedges," Baruch said in the same interview.

Having recently broken above a key trend line, the stock would be a buy on a pullback to around $54 a share, Baruch said, citing a chart.

Southwest shares ended trading down over 2.5% at $59.78 on Tuesday.

Baruch's other pick was fellow low-cost carrier Spirit Airlines.

"I own Spirit Airlines and I like Spirit Airlines," he said, adding that he'd be "very hesitant" about investing in airlines other than Spirit and Southwest.

With travel picking up again, consumers will likely be willing to shell out for vacations in the months ahead, Baruch said.

"I think Spirit Airlines is going to be well positioned to capitalize [on] that," he said. "On a technical basis, I do think that you've seen a good rally out of the hole here in Spirit."

"The $36 area has been very sticky, and although there's a lot of resistance there, it's holding that resistance and almost building sort of a flag-like pattern, which I find very bullish," Baruch said.

Spirit Airlines shares closed down nearly 3% at $33.48 on Tuesday.

Disclosure: Tengler and Laffer Tengler Investments own shares of Southwest Airlines. Baruch owns shares of Spirit Airlines.


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