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Southwest Airlines: Still Best-Performing Airline Stock in 2017?

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Jul. 21 2017, Published 3:11 p.m. ET

YTD performance

Southwest Airlines (LUV) stock has significantly outperformed all other airline stocks so far in 2017. It has risen 21.2% year-to-date as of July 20, 2017. American Airlines (AAL), the next-best performer, has seen just half of those gains, rising 12.1% in the same period. Delta Air Lines (DAL) has risen 7.4% followed by JetBlue Airways (JBLU), which has risen 4.1%, and Alaska Air (ALK), which has risen 0.42%.

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United Continental Holdings (UAL) has slipped into the red, losing its early 2017 gains. The stock has fallen 1.1% YTD (year-to-date) as of July 20, 2017. The two ultra-low-cost carriers, Allegiant Travel (ALGT) and Spirit Airlines (SAVE), continue to be in the red. Spirit has fallen ~12.6%, and Allegiant has fallen 13.3%.

The broader market, tracked by the SPDR S&P 500 ETF (SPY), rose about 10.5% in the same period. The Consumer Discretionary Select Sector SPDR ETF (XLY) rose 11.9% during the quarter.

Southwest Airlines

The reason Southwest Airlines has seen such huge gains in 2017 is due to its strong fundamentals. However, investments by legendary investor Warren Buffett in 2016 helped restore investor confidence in the airline industry. Southwest Airlines specifically benefited from Buffett’s additional investment in the first quarter. Currently, Berkshire Hathaway (BRK.B) owns an ~8.0% stake in Southwest Airlines, amounting to ~$3.0 million.

However, on July 10, 2017, Southwest failed to please investors despite maintaining its unit revenue guidance. That resulted in the stock falling ~6.0% since the guidance was released.

Series overview

Southwest Airlines (LUV) is expected to announce its second quarter earnings on July 27, 2017. In this series, we’ll see why investors are optimistic. We’ll also look at the short-term risks for LUV, what to expect for 2017, and some key indicators you should watch.

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