My Top Five Picks in the Booming Airline Sector

My Top Five Picks in the Booming Airline SectorThe Boeing Company (NYSE/BA) is going to space and its stock price is following. The top company in the airline sector just won a joint $6.8-billion contract along with SpaceX to build “space taxis” to ferry NASA astronauts to and from the International Space Station.

For Boeing, it’s just more evidence of why it is the “Best of Breed” in the airline sector and a valid component in anyone’s long-term core holdings.

SpaceX, or Space Exploration Technologies Corporation, is a project of Elon Musk’s, the man who is also the brains behind the creation and success of Tesla Motors, Inc. (NASDAQ/TSLA). Musk apparently wants to eventually offer space travel for commercial use, so this deal from NASA is moving him in the right direction.

The airline sector is hot and will continue to expand as the wealth creation around the world grows, especially in the emerging markets, such as China, Asia, and India. When income levels rise, people want to travel, and this has clearly been reflected in the superlative demand for airplanes out of China. Boeing believes China is the top aviation growth area worldwide.

The International Air Transport Association (IATA) estimates that North America will continue to be the largest airline sector market with profits of about $8.6 billion this year. The Asia-Pacific airline sector is predicted to be the second biggest with about $3.7 billion in earnings this year. Europe comes in third with an estimated $3.1 billion. (Source: “Industry on Track for Second Year of Improving Profits – Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.)

And whether you own Boeing, Embraer S.A. (NYSE/ERJ), or another of the numerous aerospace parts and services stocks, there is money to be made in the airline sector, and I expect this trend to continue.

The chart of the Dow Jones U.S. Airlines Index below illustrates the steady uptrend since November 2012 and a bullish golden cross shortly after, according to my technical analysis.

Dow Jones US Airlines Index Chart

Chart courtesy of www.StockCharts.com

In the area of parts for the new and retrofit airline sector, one of my top picks has been B/E Aerospace, Inc. (NASDAQ/BEAV). On the smaller end, investors may want to take a look at a company like Spirit AeroSystems Holdings, Inc. (NYSE/SPR) or LMI Aerospace Inc. (NASDAQ/LMIA).

Now as far as the airlines go, I favor a company like discount carrier JetBlue Airways Corporation (NASDAQ/JBLU), which is my carrier of preference when I travel, with routes in the United States, Puerto Rico, and Mexico, along with 10 countries in the Caribbean and Latin American regions.

For airlines with a longer reach, investors could take a look at a company like United Continental Holdings, Inc. (NYSE/UAL), which was formed from the merger of Continental Airlines and United Airlines in 2010.