#7 - Southwest Airlines (NYSE:LUV)
Perhaps no economic barometer has been more closely watched than the airline industry. One stock that has looked poised to benefit from an economic recovery is Southwest Airlines (NYSE:LUV). The airline is not beholden to international flights. Nor has it historically relied on business travel.
This means the airline looks to be exactly where the economic recovery will be. That is domestic flights for leisure travelers. And that market will only increase as the vaccination rollout continues to gain steam. Inflation may be something to watch because it took away some of the consumer’s buying power. But Southwest has always been known as a low-fare airline that should help support passenger travel.
LUV stock is up 32% for the year. But shares appear to be consolidating at the moment which is setting up a nice leg up for the stock. Another positive catalyst for the stock is that institutional investors are buying more of the stock.
Like several cyclical stocks, Southwest suspended its dividend and there’s no indication of when they may reinstate it.
About Southwest Airlines
Southwest Airlines Co operates as a passenger airline company that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2023, the company operated a total fleet of 817 Boeing 737 aircraft; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as ten near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.
Read More - Current Price
- $31.97
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 11 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $30.78 (3.7% Downside)
As this list of stocks shows cyclical stocks can be volatile. This volatility can cause investors to shy away from investing in cyclical stocks. But that would be a mistake. Because some of these stocks can hold up well during rough times and if investors stay away from the segment entirely, they can miss out on strong gains.
For example, at the onset of the 2020 Covid-19 pandemic, the entire market had a sharp selloff. And cyclical stocks were among the hardest hit. However, once investors took a closer look they realized the selloff was overdone. This allowed airline stocks and hotel stocks to make strong rallies in 2020.
And cyclical stocks can be good hedges against the volatility that can come with speculative stocks. One way to add cyclical stocks to your portfolio with even less risk is to invest in exchange-traded funds (ETFs). One of the best ETFs that provides exposure to cyclical stocks is the SPDR Consumer Discretionary Select Sector Fund (NYSEARCA:XLY).
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