Jim Lebenthal: why I bought Goldman Sachs & Alaska Airlines

  • Value investor Jim Lebenthal is taking advantage of market volatility and adding to his portfolio.
  • He recently bought Alaska Airlines and Goldman Sachs. He believes both companies have upcoming positive catalysts that will push the stocks to new highs.

It's been a volatile week for stocks as DC-dysfunction and changes in market leadership have led to whipsaw moves in the major averages.

But periods of volatility can be a chance for investors to buy names that might have unfairly sold off, which is exactly what "Halftime Report" trader and HPM Partners' Jim Lebenthal is doing. He recently bought Goldman Sachs and Alaska Air since he believes both companies have upcoming positive catalysts that will propel them higher.

Lebenthal bought Alaska Airlines because he sees a lot of growth ahead for the airline.

In 2016 Alaska Airlines announced plans to buy Virgin America, and the integration of the two companies should be complete by the end of 2018. In addition to syncing the operation systems of the two airlines, which will lead to greater efficiency, the merger also substantially increases the airline's footprint.

"What was a regional carrier is now going to be much more of a transcontinental carrier, so I see a lot of growth ahead for Alaska Airlines," Lebenthal said.

"This has always been the crème de la crème as far as the airline industry goes." -Jim Lebenthal on Alaska Airlines

Airlines can be a somewhat tricky area for investors since it's a highly cyclical business, which means the broader economy must be performing well for airlines to outperform. There's also a lot of competition within the sector, and external factors such as swings in commodity prices can weigh heavily on a carrier's bottom line.

But Lebenthal believes the economy as a whole is on strong footing, so he's "comfortable investing in airlines right now." "I think we're far from a recession, where you really don't want to be in these names," he added.

Financial professionals sit in the Goldman Sachs booth on the floor of the New York Stock Exchange.
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Financial professionals sit in the Goldman Sachs booth on the floor of the New York Stock Exchange.

Lebenthal also bought Goldman Sachs since he believes the bank, and the financials sector more broadly, will benefit from rising rates. He specifically likes Goldman since the bank should benefit from an uptick in M&A activity thanks to companies repatriating cash from overseas.

"I think you're going to see higher interest rates, I think you're going to see higher growth rates from GDP, that's going to benefit Goldman in a lot of ways, one of which is M&A activity should be picking up, particularly as cash gets repatriated from abroad and companies use that cash to purchase other companies," he argued.