Today’s news: Southwest Airlines (LUV) moves from Hold to Strong Buy.
Southwest Airlines (LUV – yield 1.1%) is in the news for lots of reasons this week:
• The company is taking its mechanics union to court amidst longstanding enmity relating to contract negotiations.
• The U.S. Federal Aviation Administration has approved Southwest’s request to begin service between California and Hawaii.
• Rumors have surfaced that CEO Warren Buffett of Berkshire Hathaway (BRK/A) might be planning to purchase Southwest—the entire company. I’ve outlined this possibility in the past. To recap, Buffett has repeatedly expressed an active desire to make a large acquisition; Berkshire has enough money on hand to buy a large company; Berkshire recently owned roughly 7% to 9% of the outstanding shares of four major airlines; and Buffett had previously identified Southwest as an airline that held his interest.
• The stock rose 4% yesterday after a recent price correction.
LUV is an undervalued growth stock. I was waiting for a pullback so that I could return LUV to a Buy recommendation. The pullback was quick! LUV moves from Hold to Strong Buy now. Strong Buy.