With such uncertainty, following an absolute return strategy continues to offer investors the biggest bang for their buck. There is no sense in guessing where the market will be down the road.

Instead, buy cheap stocks and sell stocks that are expensive. Then blend the two approaches together in one portfolio and chances are you'll make money.

Even with a huge rally in stocks, the S&P 500 ended the second quarter with a year-to-date gain of 1.78%. That is a vast improvement compared to the 11% loss at the end of the first quarter, but it's a minimal return for taking risk in the stock market.

Investors need to do better -- and they can.

TheStreet.com's Jim Cramer says the diamonds in the rough don't get much press, but they're the real heroes in this market.

The troubled airline industry. The troubled auto industry. Have they ever not been "troubled"? For as long as I have been in this business, these two industries have been in huge trouble. Yet somehow it is news that United (NASDAQ: UAUA) (Cramer's Take), AMR (NYSE: AMR) (Cramer's Take) and Delta (NYSE: DAL) (Cramer's Take) are in trouble. Somehow we're still sweating the auto program -- and I, for one, thought Steve Rattner was doing a pretty good job and don't want to read into his resignation because too many times in my life I have seen the smear and know it for what it is.

I want to talk about the industries that aren't troubled. Last night CSX (NYSE: CSX) (Cramer's Take) reported a hugely profitable quarter despite a big decline in revenues. At one point the rail industry was a hugely troubled industry and you used to worry about the companies swinging to big losses every downturn. Now CSX gets 6 inches of ink today and the deeply troubled airline industry gets reams.

Continental Airlines (NYSE: CAL) just got the relief it needs to compete. Despite resistance from the Department of Justice (which can only recommend), the Department of Transportation has granted the airline immunity from antitrust laws. This clears the way for Continental to work with United Airlines (NASDAQ: UAUA) -- and other carriers -- on international routes. Now, the airline can join Star Alliance, which already has antitrust immunity.

At the same time, DOT approved a joint venture among Continental, United, Lufthansa (OTC: DLAKY) and Air Canada. This new relationship would involve trans-Atlantic routes.

Quarterly earnings could be up year-over-year by the fourth quarter. A low threshold for improvement, as a result of last year's Q3 financial meltdown, could set the stage for the appearance of a recovery, but the ride from here to there will be a difficult one.

Data from Bloomberg and S&P suggests that profits for stocks comprising the S&P 500 Index may be down 21% next quarter. It's still a double-digit blow, but a better result than Q2's estimated 34% -- and far ahead of Q1's 60% year-over-year fall in profits. The driver of a recovery, however concealed by low expectations, is likely to be a combination of unemployment and consumer spending. Last month, we saw unemployment reach a 26-year high, putting obvious constraints on purchasing.

Analyst upgrades:

• Citigroup upgraded Adtran (NASDAQ: ADTN) to Buy from Hold on expectations the company will benefit from the broadband Stimulus funds.
• Morgan Stanley upgraded Continental Airlines (NYSE: CAL) to Overweight from Equal Weight based on relative valuation and views the company as a "survivor." Additionally, the analyst lowered 2009 industry estimates but believes it is the last cut for the year and is incrementally more positive on the sector.
• Morgan Stanley also upgraded EXFO Electro-Optical (NASDAQ: EXFO) to Overweight from Market Weight based on valuation.
• Tata Motors (NYSE: TTM) was upgraded to Buy from Hold at Deutsche Bank.
• Ascent Solar (NASDAQ: ASTI) was upgraded to Neutral from Underweight at JP Morgan.
• Mechel Steel (NYSE: MTL) was upgraded to Neutral from Underperform at Credit Suisse.

Continental Airlines (NYSE: CAL) is seeking immunity from antitrust laws to work more closely with United Airlines (NASDAQ: UAUA) and others on international routes. And, since airlines operate in a state of seemingly perpetual turmoil, what's the harm? According to the Justice Department: plenty.

The airline sought broad immunity as part of an effort to join Star Alliance, which includes US Airways, Lufthansa (OTC: DLAKY), and Air Canada -- along with United. Continental believes that it needs to join Star Alliance in order to remain competitive, especially with airlines that have this type of immunity already.

AMR Corp. (NYSE: AMR), the parent of American Airlines, reported earnings for the first quarter on Wednesday. Revenues decreased 15%, and on an adjusted basis, the company lost $1.30 per share. According to this source, the market was calling for a loss of $1.62 per share. Since management was able to beat by such a wide margin, Wall Street decided to reward the stock by bidding it up over 20% (that's how the shares were trading at the time I started this article).

Airlines are still having a problem with the economy. Consumers aren't traveling as much, businesses are cutting back on sending executives across country. Indeed, I'm sure the summer months are going to see a lot of vacation plans being eliminated as people decide to stay closer to home.

AMR Corp (NYSE: AMR) closed at $4.16. AMR is scheduled to report Q1 EPS on April 15. WTI Crude oil is recently up 2.51% to $50.62 according to Bloomberg. AMR April and May option implied volatility is at 133, August is at 128; near its 26-week average according to Track Data, suggesting non-directional price movement.

Delta Air Lines (NYSE: DAL) closed at $6.91. DAL is expected to report Q1 on April 21. DAL May option implied volatility is at 108; June is at 114; below its 26-week average of 122, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

According to the Associated Press, the International Air Transport Association (IATA) believes that world airlines will lose $4.7 billion this year. A loss of this size is more than world airlines saw following the September 11, 2001 terrorist attacks. The industry group attributes the losses to "the rapid deterioration of the global economic conditions."

This revision basically doubles the earlier forecast from December, causing the CEO of the IATA, Giovanni Bisignani, to note that "The state of the airline industry today is grim ... Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago." The IATA predicts revenues will drop by $62 billion to $467 billion, a 12% decline.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• American Express Co. (NYSE: AXP) earnings tumbled in Q4 but came in just short of expectations.
• Best Buy Inc. (NYSE: BBY) earnings prospects and cash flow led to an analyst's upgrade.
• Bristol-Myers Squibb Co. (NYSE: BMY) topped analysts Q4 expectations, sending shares higher.
• Colgate-Palmolive Co. (NYSE: CL) posted a better-than-expected Q4 profit despite the weak economy.
• Delta Air Lines Inc. (NYSE: DAL) reported a big quarterly loss due to merger costs and bad fuel hedges.
• Eaton Corp. (NYSE: ETN) Q4 earnings fell on lower exchange rates and charges related to an acquisition.
• E*Trade Financial Corp. (NASDAQ: ETFC) narrowed its Q4 net loss but fell short of expectations.

A consequence of a weakening airline sector is the pain it will cause plane-maker Boeing (NYSE: BA). With capacity tightening, the need for aircrafts is diminishing.

Imagine planes just sitting idle in the desert. That vision is becoming a reality.

Fortunately for investors, that vision will take time to play out. In the meantime, Boeing gets a free pass as they work through years of order backlog that built up during the last business cycle.

If you take a look at Boeing during the last few months, it is clear that investors have yet to catch on to a world of lower revenues going forward.

The airline industry is a mess and shares of the major airlines are to be avoided at all costs. With an economy that is ailing and fuel hedges gone awry, the sector is once again facing the prospect of steep losses.

Tuesday, we learned how bad it can get for the group. Delta Air Lines (NYSE: DAL) reported a quarterly loss of $1.4 billion, or a whopping $2.11 per share. The company blamed merger costs and bad fuel hedges for the big loss.

DuPont (NYSE: DD) reported Tuesday morning, saying it swung to a fourth-quarter loss. DuPont reported a loss of $629 million, or 70 cents per share, but excluding a restructuring charge the loss is 28 cents per share. Revenue fell 16% to $6.07 billion. Results were below analyst estimates of a loss of 24 cents per share on revenue of $6.17 billion.

Verizon Communications (NYSE: VZ) also reported Tuesday morning, saying it earned $1.24 billion, or 43 cents a share, in the fourth quarter. On an adjusted basis, Verizon earned 61 cents a share compared to 62 cents a share a year ago. Sales were $24.6 billion. Verizon missed estimates only slightly and shares gained 1.6% in premarket trading.

Yahoo (NASDAQ: YHOO) is reporting after the close today and analysts expect earnings of 13 cents a share for the period, on $1.4 billion in net revenue, according to FactSet Research. Shares indicated higher in premarket trading.

As an investor, I really despise the airline sector at the moment. These companies are notorious for being poorly run cash-losing machines.

Now, in the midst of a deep recession and too many airplanes flying too few customers, airline stocks can be expected to be poor performers in the short run and maybe longer.

I made the sector part of my Top 10 Stocks to Avoid in 2009. The main thesis, aside from the obvious recessionary issues, was that oil prices would resume their climb at some point in 2009.

Specifically, I suggested investors avoid Delta Airlines (NYSE: DAL) and United Airlines (NASDAQ: UAUA).

Higher oil prices directly impact the bottom line of the air carriers. The higher oil goes, the more difficult it is for the airlines to make a profit. This summer, with oil prices hitting $150 per barrel, the future of the group was in peril.

That said, the reality of higher prices caused the group to make some necessary changes that included mergers, reduced capacity and important surcharges. The operating environment had the potential to bring much needed discipline to the carriers.

Unfortunately, higher fuel prices did not last long enough to bring enduring change to the group. As prices fell, airline stocks rallied. It was looking good until the economy tanked.

With the recession, oil prices suddenly mattered less. Instead, the focus was on the consumer and business traveler cutting expenses during a contraction.

The airline sector loses if the economy rallies, as such a state brings higher oil prices and lower profit. If the economy stalls, the sector loses customers and revenues fall to unsustainable levels.

The point is that it is no-win situation for the group.

cIn the News:
The Biggest Insurance Scheme of All Time?
UnitedHealth Group, one of the country's largest insurers, settled what may be one of the largest health insurance schemes of all time on Tuesday after allegedly cheating sick patients out of hundreds of millions of dollars. And it probably would not have happened without Mary Jerome, an advanced-stage ovarian cancer patient who finally just said "enough" after getting hit with $46,000 in medical bills – even though she had top-notch insurance coverage.
http://www.cnbc.com/id/28643259