Alaska Air Looks Like a Highflier

By Mara Der Hovanesian

The old saw is: Never buy what Wall Street reveres. The flip side: Don't sell what others revile. And right now, everyone hates airlines--what with labor disputes, rising fuel costs, and travelers' terrorism jitters. But don't lump top-tier regionals like Alaska Air Group (ALK ) in with the rest. The Seattle carrier has a stronghold in the Pacific Coast market, with a profitable commuter unit, Horizon Air. This year it beefed up, adding new planes and routes to Miami and Newark, N.J. The stock's 23.8% loss this year looks bad, but Bloomberg's U.S. Airlines Index is down 40%.

Most analysts downgraded future earnings after third-quarter profits slid nearly 60%. Ray Neidl of Blaylock & Partners has just upgraded Alaska from hold to buy. "I decided they were all wrong," says Neidl, who raised his 2003 earnings estimate from $1.20 a share to $1.79. His price target is 27, up from 22 now. Alaska is the one small-cap airline stock Gerard Heffernan of Lord Abbett owns. "Low debt and plenty of cash puts them in a secure position," he says. His firm, which manages $1.6 billion in small-cap issues, has some 300,000 shares in the airline.

Gene Marcial is on vacation.

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