Wanna know why you can't beat the market?
Because you continue to own names like IBM and Bank of America — great companies for sure, but terrible stocks that are owned by the worst kind of investor, the "closet indexer" (more on that in a bit).
If you're ready to try to beat the market, then my call to action will certainly sound bold: buy the airlines, and here's why:
Airlines are not investments. You will never see one in the vaunted "one decision stock club."
But they can make great trading tools either from the long- or short-side, particularly in a market that seems tethered to 10,000 level for the next 200 years.
I happen to like them here from the long side, especially Delta . Unlike previous times, the industry has finally weaned itself off its nasty habit of grabbing market share through price wars. Moreover, capacity remains at reasonable levels. And don't expect those irksome extra fees for pillows and baggage to disappear anytime soon. Put simply, the airlines have something that has alluding the industry for years: pricing power.
Delta's got all of this going for it, and something else: its merger with Northwest is one of the few (I like to say one in ten) that appears to be working out. There are real costs savings here, as evidenced by yesterday's earnings, and that should bode well for the company, even if the economy heads south.
But here's the real reason you may want to get on board: owning these stock could give you an edge against the broader market. There are no closet indexers (fund managers who claim to add value but really just buy the broader index) surreptitiously picking up shares of AMR. This is big boy swim territory. Index huggers (same concept) need not apply here either.
So if you want to stand out, if you want to try and beat the market, airlines could be your ticket.
Related Links:
- Analyst Watch: Airline Stocks Ready to Soar?
- Boeing CEO Talks Deals at Farnborough
"The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.
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Gary Kaminsky does not hold any equity positions.
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