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Southwest Airlines Co. (LUV), Delta Air Lines, Inc. (DAL), JetBlue Airways Corporation (JBLU): How to Keep Your Portfolio Flying High

How hedgies are flying

Going into 2Q, Southwest Airlines Co. (NYSE:LUV) had 32 hedge funds long the stock, which was a 33% increase from the previous quarter. This includes Edgar Wachenhiem’s Greenhaven Associates, with 3.4% of its 13F portfolio invested in the stock (check out Greenhaven’s newest picks).

JetBlue Airways Corporation (NASDAQ:JBLU) had a mere 17 hedge funds long the stock, a 13% increase from the previous quarter. Matt Sirovich and Jeremy Mindich’s Scopia Capital had the largest position in the airline, worth close to $76 million (check out what else Scopia loves).

Meanwhile, among major airlines, Delta Air Lines, Inc. (NYSE:DAL) had some of the heaviest interest from hedge funds. At the end of the first quarter, there was a total of 68 hedge funds long the stock, a 10% increase from one quarter earlier. This includes Lansdowne Partners, having the largest position at $576 million and making up 7.9% of its 13F portfolio (see Lansdowne’s top stocks).

How you should fly

With industry tailwinds likely to push all the major airlines higher, it can be tough to differentiate which is the best, but I think that there is a clear winner — Southwest.

Southwest has gotten little to no respect over the past five years, meanwhile, United Continental Holdings Inc (NYSE:UAL) and US Airways are up over 500%.

From a debt standpoint, Southwest appears to be the best-positioned. The airline has a debt-to-capital ratio of 23%, compared to Delta Air Lines, Inc. (NYSE:DAL)’s 99%, United Continental Holdings Inc (NYSE:UAL) 89%, US Airways’ 85% and JetBlue Airways Corporation (NASDAQ:JBLU)’s 54%.

Southwest Airlines Co. (NYSE:LUV) is also one of the few airlines paying investors a dividend (yielding 1.25%). Delta Air Lines, Inc. (NYSE:DAL) also plans to implement a $0.06 quarterly dividend, which will be a 1.28% dividend yield on its current stock price, while Skywest pays a 1.16% yield. The fact that a number of top airline operators are paying a dividend suggest that airlines believe they have a better handle on operating costs and the volatilize of the industry. Thus, I like Southwest as a long-term play, while also thinking that Delta could reward investors as well, given its recent dividend plans and market-leading position.

The article How to Keep Your Portfolio Flying High originally appeared on and is written by Marshall Hargrave.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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