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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

3 Great Value Stocks to Buy Now

Stocks in this article: JBLU ERES CFN AMSC

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By David Sterman

NEW YORK ( StreetAuthority) -- In the market's remarkable run-up in the past two years that saw the major averages roughly double from the March 2009 lows, an increasing number of investors have looked to take profits in some of their best picks. As a result, some of these stocks have lost their momentum and have pulled back from recent peaks.

Here are three names I've been watching that are now quite nicely priced.

1. JetBlue (BLU)

It's been quite a while since anyone called this low-cost airline a "growth story." Sales growth has been steadily decelerating from about 40% in 2006 to about 15% in 2010. But maturity has its benefits. Management has slowly learned how to squeeze more profits out of each customer by optimizing its route map, charging extra for certain seats and tightening requirements for its frequent-flyer program. That's why EBITDA growth has exceeded 10% for four of the past five years and may actually accelerate in 2011 and 2012.
Jet Blue

The rising EBITDA is likely to come from a factor beyond management's control. Many airlines are starting to push through a series of strong fare hikes as demand for air travel is showing no signs of slowing. Of course, the recent spike in fuel prices doesn't help, but the fare hikes are more than off-setting any cost pressures. This creates a sweet spot for JetBlue, which was originally launched more than a decade ago to build market share through low-cost pricing. When the major carriers radically cut fares in recent years, JetBlue lost its pricing edge. But with fares on the rise, JetBlue is likely to keep boosting its own fares -- albeit at a more moderate pace -- to fatten profits while still staying below pricing levels of rivals.

A bullish outlook for 2011 helped propel shares north of $7 in early 2011. Shares have subsequently slipped nearly 20% on only "so-so" fourth-quarter results. Profits missed forecasts thanks to lousy weather at the carrier's New York and Boston hubs. Weather in the first quarter has been more obliging, yet many in the U.S. Northeast (myself included) badly needed a break from the brutal stretch of cold and snow. That's been a real positive for JetBlue in recent weeks, as the carrier has beefed up its route structure to Florida and the Caribbean and is said to be seeing strong demand.

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