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Should You Buy This Sandy-Soaked Stock?

By Tim Beyers - Nov 12, 2012 at 10:00AM

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Southwest's traffic may be down but the stock is reasonably priced.

Airline stocks have taken a hit following Hurricane Sandy, which caused more than 20,000 North American flights to be cancelled and resulting in an estimated $190 million in lost revenue. Legacy carriers Delta Air Lines (DAL -1.53%) and United Continental (UAL -1.49%) are expected to take the brunt of the damage -- an estimated $95 million combined, according to analyst firm Hunter Keay -- but Southwest Airlines (LUV -2.11%) could also lose $10 million.

The timing stinks. October traffic fell 2.4% year over year while available seat miles declined 1.6%. Load factor fell 70 basis points to 80.7%. Fewer planes flying fewer routes at a lower capacity doesn't bode well for fourth-quarter results. Yet, given Southwest's valuation, dividend (a rarity among airlines), and popularity among fliers, there's still reason to believe in this business. Find out more in the video below, which was shot on location at Denver International Airport.

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Stocks Mentioned

Southwest Airlines Co. Stock Quote
Southwest Airlines Co.
LUV
$42.65 (-2.11%) $0.92
United Airlines Holdings, Inc. Stock Quote
United Airlines Holdings, Inc.
UAL
$43.55 (-1.49%) $0.66
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$38.64 (-1.53%) $0.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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