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Top small-cap investor sticking by airlines

Scott Mlyn | CNBC

Craig Hodges, chief executive officer of Hodges Capital Management, is sticking by airlines as the group falls from an all-time high.

In the past month, shares of airlines lost nearly 10 percent on concerns over increased capacity, higher fuel costs and fierce competition.

But that may be a buying opportunity, according to Hodges, who holds American Airlines in his portfolio for the "Squawk Box " Portfolio Challenge.

"We think these issues are way overblown, and trading at four times earnings, we feel AAL has limited downside and tremendous upside potential," said the small-cap specialist, who believes shareholders could even get rewarded in the future with a potential dividend.