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Here's When to Buy Airline Stocks (Hint: Not Now)

Posted at 5:00 a.m. EDT on Friday, May 29, 2015

The airlines are a hard sell right now, and I don't mean that they are difficult to part with. I mean that they are, right now, in free fall and this market abhors bottom fishing.

Think about it. Can you recall a group that was able to recover from a sustained free fall in ages? Can you think of any sector that's been able to bounce from a real hammering and come out on the other side?

Sure, one could say the biotechs have. Yet most are still well below their highs of earlier in the year. Some of the cloud stocks have come back but they, too, haven't gotten anywhere near where they were 15 months ago.

Now, those comebacks were injured by supply of the stock, as many initial public offerings of inferior merchandise blotted out any hope for a sustained rally.

This potential airline comeback is harder to imagine because this one's related to earnings, price to earnings multiples, and amazing outperformance for far longer than anyone thought possible.

Let's take the case of Southwest  (LUV), which is the best and most profitable operator there is. When I spoke to CEO Gary Kelly last night, it was very clear to me that he's being far more disciplined than some pundits think. But it takes many to tango, and it doesn't matter if Gary's being disciplined if others aren't.

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