Warren Buffett is one of the greatest investors in the history of the stock market. There is absolutely no doubting that claim. However, over the bull market that ran from 2009 until earlier this year, the Oracle of Omaha’s flagship investment vehicle Berkshire Hathaway has underperformed the S&P 500 on a total return basis, which includes reinvested dividends.

Buffett stunned the investing community at Berkshire’s May 2 annual meeting, when he said his Omaha, Nebraska-based conglomerate had in April sold its roughly $6 billion of stock in American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.

This is not the same Buffett that scooped up bank shares in 2008 and 2009 as they plunged to the lowest levels in years. For a man that usually maintains that betting against the United States is a lousy trade, he sure strayed from his long-time playbook.

We screened the BofA Securities airline stock universe looking for Buy-rated companies that make sense for investors now. We found three that are solid ideas for long-term growth investors.

Alaska Air

This company has a big west coast exposure and continues to rank high on Wall Street. Alaska Air Group Inc. (NYSE: ALK) is the parent company of Alaska Airlines. The company serves more than 100 cities through an expansive network in Alaska, the Lower 48 states, Hawaii, Canada and Mexico. Despite recent challenges by other carriers for superiority in the Northwest, the company has strong customer loyalty, which has contributed to outstanding earnings and revenue growth.

Alaska Air focuses on point-to-point traffic in the Pacific Northwest. However, about 20% of its traffic connects over its hubs in Anchorage, Seattle and, to a lesser extent, Portland. By developing transcontinental markets, and more recently Hawaii, the company has transformed from a largely north-south directional carrier to one with a more balanced network.

The BofA Securities team just upgraded the shares to a Buy rating and noted this in a report:

Alaska Air is an exceptionally well-run airline, in our view, with strong free cash flow generation and an improving balance sheet. The company is also returning to its low cost roots with solid cost controls, which should help the company in a recovery. Further, we believe Alaska Air is well positioned for a recovery in airline demand as we expect domestic travel and leisure travel to recover first.

The BofA Securities price target for the shares jumped to $53 from $36. That compares with a much lower Wall Street consensus target price of $40.38. Alaska Air Group stock was seen on Monday trading at $50.24 a share, after a stunning 17.6% rise on the day.

This low-cost carrier has a unique business strategy: flying where other airlines do not. Allegiant Travel Co. (NASDAQ: ALGT) connects 136 city-pairs and typically flies each leisure route only a few times a week, using older planes with low capital costs. An early unbundler, the company generates more fees per passenger than any U.S. airline. Allegiant’s largest market is Las Vegas, followed by Orlando and Phoenix.

The company announced earlier this year the largest service expansion in its history, which includes 44 new nonstop routes, including 14 routes to three new cities: Chicago, Boston and Houston. This major addition to service is driven by Allegiant’s goal of connecting leisure travelers in underserved cities to popular destinations around the country. Most of the 44 new routes are non-competitive, with no other airline providing service between those airports.

The BofA Securities price target is $140, while the posted consensus target is lower at $100.67. Allegiant Travel stock closed up 8% on Monday to $133.75 per share.

Southwest Airlines

This company continues to expand routes, remains a low-cost leader and is also one of the top airline picks across Wall Street. Southwest Airlines Inc. (NYSE: LUV) operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. It was one of the airlines with the fewest delays last year.

As of December 31, 2019, the company operated a total of 747 Boeing 737 aircraft, and it served 101 destinations in 40 states, the District of Columbia and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos.

The company recently had a massive stock sale to raise cash and improve its balance sheet. The analysts noted this in a recent research report:

Southwest Airlines completed a $3.9 billion capital raise which brings total liquidity to $14.8 billion after all the government payroll support funds. At a cash burn of $34 million per day, the company has enough liquidity to get through the next 435 days (vs 320 days for Delta / 225 days for United). Even with a slow recovery, we expect Southwest to end 2020 with $10 billion in cash and $1.5 billion in net debt.

The company has suspended its dividend until September of 2021. BofA Securities has set a $44 price objective, which is up from a prior $38 price target. The posted consensus target was last seen at $38.94, and Monday’s last trade of Southwest Airlines stock came in at $40.59, after a solid 6.4% increase on the day.

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Given the huge run in the market, and especially these top airline stocks, it makes sense to buy partial positions, and see if we don’t pull back some as the quarter comes to an end. With no disrespect to Warren Buffett, selling at the low is never a smart idea. Perhaps he waited 30 days and bought some of these top companies back to avoid a wash-sale.

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