This post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.
"Airline stocks are looking good now; the airlines should benefit greatly from the big drop in crude oil, as lower crude means lower fuel costs for their operations," notes breakout specialist Leo Fasciocco.
In his Ticker Tape Digest, he looks at Allegiant Travel Co. (NASDAQ: ALGT), a "niche travel airline providing nonstop flights from 53 small cities to large vacation destinations such as Las Vegas and Orlando."
The advisor explains, "The Las Vegas-based company has annual revenues of $483 million. The company also has fixed-fee deals with Harrah's Entertainment to fly certain prespecified routes. The firm's fleet is composed solely of McDonnell Douglas MD-80 aircraft.
"ALGT recently broke clear of a seven-week flat base. Its price pattern of the past few weeks has been a zig-zag with a bias to the upside. The current base is a bit choppy. However, the technicals are extremely bullish. ALGT's push to a new high is very bullish and could bring in more buying.
"The stock has appreciated 37% the past 12 months. It has easily outperformed the S&P 500 index, which is down 38% during the same time. In most cases the stock tends to move higher after the earnings report. That bodes well for the next earnings report.
"We believe the stock is now in a great spot to do well because earnings for the upcoming fourth quarter are expected to soar 184% to 68 cents a share from 24 cents a year ago. That 68 cents is an upgrading from a prior consensus estimate of 63 cents share.
"The stock's accumulation -- distribution line is in a strong up trend and making new peaks. Most importantly, it has broken out to the upside. That shows there is strong underlying buying in the stock. The stock's momentum indicator is strongly bullish.
"For the year, analysts expect ALGT's net to be up 3%to $1.52 a share from $1.48 a share a year ago. However, the key to the stock's performance is that profits for 2009 should soar. Wall Street is forecasting a 111% jump in net to $3.21 a share from the anticipated $1.42 in 2008.
"The stock sells with a price-earnings ratio of 30. We see that as reasonable. ALGT recently extended its deal with Harrah's to provide charter air service. ALGT's October traffic showed an 18% increase from a year ago.
"Overall, ALGT is a leader in the resurging airline sector that is being aided by a drop in fuel costs which should boost profits. The key will be to see if ALGT can maintain good traffic in a slowing economy.
"The largest fund buyer recently was Fidelity Advisor Mid-Cap Fund, which purchased 481,000 shares. It is the largest fund holder with a 2.4% stake. A key buyer recently was 4-star rated Neuberger Berman Small Cap Growth Fund which purchased 149,000 shares.
"Insider activity is very bullish. Insiders have been heavy buyers recently, while they have done very little selling."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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