Today The Investment Letter Editor David Jennett recommends a new play on economic growth in the U.S.
“I have been on a quest to reduce our cash position over the past few months and the continued good news about the economy has me thinking that this portfolio needs to carry more weight in the services category. Toward that end, I am adding JetBlue Airways Corp. (JBLU). JetBlue has its headquarters in Long Island City, New York and primarily serves New York, Boston, Fort Lauderdale and Orlando, although it does offer flights to all parts of the U.S. and a few international destinations as well.
“Like most airlines, JetBlue spends much of its time trying to control costs in order to maintain profitability. Fuel costs are, of course, primary to this goal, while maintaining the proper amount of flights to assure nearly full planes is part of that as well.
“As this economy continues to recover, the airline has seen sales and profits increase as it has done a good job at hedging fuel costs while increasing seats available and lowering the number of empty seats on each plane. The net result is an airline that has grown sales at a 35% annual rate for the last five years, with the expectation that it can grow sales 31% for the next five years. The combination of growing sales and effective costs controls should lead to rising profits and a higher stock price.
“Investing in JetBlue right now is an expression of faith in this economic recovery. Given all the recent data, I think this company has every reason to believe that business will continue to grow.”
- David C. Jennett, The Investment Letter, March 25, 2013