Delta Air Lines Inc (DAL)

PE ratio of about 10X, which is cheaper than some of the other airlines. All of the airlines are benefiting from the US industry consolidation. This gives them pricing power, such as checked bags charges, etc. Even at 10X, it is still an attractive industry, but he doesn't think this would be his 1st choice. His preference would be United Airlines (UAL-N), which he feels is a better run business and one you can count on doing better over the next 2-3 years.

He is not too fond of airlines in general. However, this one got a bit of good news today in that their bonds are gaining on the credit side in terms of their rating. Airlines typically are high fixed costs, so in times of trouble they don’t do well. However, all of them seem to have been doing well. If you do see a correction, airline stocks will come off quickly.

(A Top Pick Aug 29/13. Up 91.33%.) The industry had gone through bankruptcy, and through that process had managed to rebalance their cost structures, notably their union contracts. They all got financial discipline finally and got pricing power.

Up until two years ago the entire earnings of the industry was negative. AMR is the latest bankruptcy. Now they have consolidated. Margin is being helped by charges for checked baggage and changes.

The angle of ascent has been steep. Corrections are fairly sharp. Thinks they will continue to experience upside but not without the sharp corrections. Don’t panic too much. Look for a hook down in momentum indicators to exit.