4-Star Stocks Poised to Pop: Southwest Airlines

Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, discount airline Southwest Airlines (NYSE: LUV  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Southwest's business and see what CAPS investors are saying about the stock right now.

Southwest facts

Headquarters (founded) Dallas (1967)
Market Cap $10.3 billion
Industry Airlines
Trailing-12-Month Revenue $11.7 billion
Management CEO Gary Kelly (since 2004)
CFO Laura Wright (since 2004)
Return on Equity (average, past 3 years) 4%
Cash/Debt $3.4 billion / $3.5 billion
Competitors JetBlue Airways (Nasdaq: JBLU  )
AMR (NYSE: AMR  )
United Continental (NYSE: UAL  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 85% of the 1,592 members who have rated Southwest believe the stock will outperform the S&P 500 going forward. These bulls include All-Stars Jeffreyw and torpex77, both of whom are ranked in the top 15% of our community.

Just three days ago, Jeffreyw kindly updated Fools on the Southwest story:

Best airline business model on the planet. New labor agreements allow larger 737's, purchase of [AirTran (NYSE: AAI  ) ] opens [Southwest] to international destinations in the Caribbean and Mexico. It's not about being the biggest airline, it's about being consistently profitable.

No kidding. Thanks to its low-cost, direct point-to-point routes, Southwest's operating margins are consistently in the high single-digits, while legacy foes AMR, Delta (NYSE: DAL  ) , and UAL (although its merger seems to be working) are infamous for their negative margins. And while JetBlue's low-cost efficiency comes close, Southwest has a much longer track record. In fact, 2010 will mark Southwest's 38th consecutive year of profitability.

CAPS member torpex77 sums up the bull case from a flyer's point of view:

I don't like the airline industry. Lots of options for picking air travel, fares seem high and are subject to increases with fuel costs.

But it seems like most of the carriers are doing their best to piss off their customers with extra fees.

The one airline that isn't is Southwest. ...

They always seemed to have the best fairs AND (more importantly) the best service. They had the least delays and cancellations of any airline I flew.

I do continue to hear good things about their management and financial situation. But really, I'm picking this one because I like to do business with the company. Brand loyalty is a very good thing, particularly in a competitive industry.

What do you think about Southwest, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Southwest is a selection of Motley Fool Stock Advisor. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policy always gets a perfect score.


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