Delta Air Lines: Please Sir, Can I Have Some More?

Delta Air Lines (DAL) has gained 133% so far this year, but that hasn’t stopped the folks at Barclays from putting it “at the top of [its] airlines list for 2014.”

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Sure that gain is huge, both on its own terms and relative to its competitors. Delta has outgained nearly all its peers, as Southwest Airlines (LUV) has gained 82% in 2013, Alaska Air (ALK) has risen 68% and United Continental (UAL) is up 61%. Spirit Airlines (SAVE), with a 144% rise, was one of the few airlines to trump Delta.

So why is Barclays still bullish? David Fintzen and team explain why they left Delta’s investor meeting yesterday feeling optimistic:

The focus was rightfully on the 'sustainability' question that we think remains central to the long-term upside in DAL shares. Specifically, a long-term operating margin target of 10-12% was encouraging, but also strikes us as realistic given the initiatives (re-fleeting, etc) underway. Secondly, we were encouraged by comments that margin improvement can still come from the 'core' of the network, not just the outliers. It's hard for us to quantify, but setting a high threshold (i.e. not simply accepting an 8% margin) in a route/city/hub strikes us as a seemingly simple mindset change that matters (and needs to become engrained in the industry). On the cost side, similarly, multiple comments around 'restoring balance to the supply chain' strike us as similarly hard to quantify, but indicative of an expectation to push margins higher.

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Delta has gained 1.9% to $28.19 today at 1:48 p.m., while United Continental has risen 3.4% to $37.83, Spirit Airlines has advanced 2.2% to $43.32, and Southwest, which was upgraded by Merrill Lynch today, has jumped 3.6% to $18.62. Alaska Air has dropped 1.3% to $72.49.

KeyBanc Upgrades AvalonBay Communities Inc to “Buy” (AVB)

KeyBanc announced on Thursday that it has boosted its rating on AvalonBay Communities Inc (AVB) to “Buy.”

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The firm has upgraded AVB from “Hold” to “Buy,” and has given the company a $139 price target. This price target suggests a 15% upside from the stock’s current price of $120.55. KeyBanc has also upgraded residential REIT UDR, Inc. (UDR) and has cut its rating on Essex Property Trust Inc (ESS).

Analyst Karin Ford noted: “We upgrade the Apartment REIT vertical from Market-Weight to OVERWEIGHT based upon attractive valuation levels that overlook the potential for accelerating fundamentals, as the impact of new supply wanes and continued employment gains support greater rental demand into ’15.

“We believe the short-cycle nature of the apartment vertical’s leases place it relatively well within an env’t of rising rates driven by an imprv'g economy; the group’s underperformance YTD and current relative valuation level (4% discount to REIT sector on AFFO multiple) reflects concern over slowing fundamentals amid elevated new supply. We think new supply should peak in late-’14 and give way to accelerating absorption trends.”

AvalonBay Communities shares were mostly flat during pre-market trading Thursday. The stock is down 11% YTD.

3 Stocks Building on Strong Fundamentals Into 2014

Popular Posts: 17 Stocks With Ex-Dividend Dates to Put on Your RadarThe Only 2 Retail Stocks to Buy NowLUV – Southwest Stock Soars Above the Airline Crowd Recent Posts: GM – General Motors Looks Toward a Smoother Road 3 Stocks Building on Strong Fundamentals Into 2014 End 2013 on a High Note With These 58 Stock Trades View All Posts

This is the time of year when everyone is going to start looking for tax loss candidates to buy hoping for a quick recovery in the early weeks of 2014.

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While the idea has some merit, a better approach might be to look for those stocks that have done very well and have the type of solid fundamentals that attract institutional buying pressure. In a year when the markets have rallied sharply, stocks that are down big like JC Penney (JCP) and Blackberry (BBRY) have performed poorly for a reason. They have poor fundamentals and a very uncertain outlook that is unlikely to attract buyers as the market advance continues to thin out.

Instead, you should look for the stocks that continue to build on solid fundamentals, with help from Portfolio Grader.

Shares of Boston Beer (SAM) have had a very good 2013 and have doubled in price so far. Conventional wisdom might tell you to take gains in the stock, but the truth is that fundamentals of SAM are still excellent. Analysts are still raising their estimates for both 2013 and 2014, and the company is showing excellent sales and earnings growth. The brewer is still seeing excellent consumer preference for its Sam Adams beer and Twisted Tea malt beverages. SAM stock was upgraded back in August and remains a “strong buy” as we head into the end of the year.

Sports bar chain Buffalo Wild Wings (BWLD) has had a stellar year, and BWLD stock price has gained more than 100%. It looks like the company will roll right into 2014 on a tear that should continue as people head out to watch all the Bowl games and NFL playoffs. Sales and earnings momentum are excellent, and the analysts are racing to catch up as a result of the chain’s success. BWLD has posted two consecutive earnings surprises, and estimates have been raised for the final three months of this year as well as all of 2014. The stock was upgraded to an “A” in November and remains a “strong buy” at the current price.

Another stock that has had a great year in 2013 is Taser (TASR). The company has seen strong order flow from military and police customers this year, and sales and earnings have just exploded along with TASR stock price. TASR stock price has doubled, but the earnings have more than tripled so far in 2013. Business has improved so rapidly that analysts have been caught flatfooted, and the company has posted three consecutive positive earnings surprises. The company is also seeing strong orders from police departments around the country for the new wearable cameras that have helped curb complaints and resolve accusations of bad behavior by officers. The stock is rated “B” by Portfolio Grader and remains a “buy.”

Buying stocks that are down in hopes of a bounce can lead to a portfolio full of companies whose fundamentals not justify investment right now. Rather than guess on a rebound, try to load your portfolio with shares of companies with strong fundamentals that are likely to attract buying pressure and continue moving higher in the new year.

Louis Navellier is the editor of Blue Chip Growth.

Delamaide: Lew used clout to push Volcker Rule

WASHINGTON — The approval Tuesday of the Volcker Rule barring banks from speculative trading for their own account tells us a lot about the future of financial regulation in this country.

Using a new bully pulpit created by the Dodd-Frank financial reform, Treasury Secretary Jack Lew was able to bring the five agencies responsible for regulating banks together on this contentious issue in the face of massive headwinds from financial lobbyists.

Treasury chiefs in the past, while they could exert influence behind the scenes, were not really able to crack the whip in this fashion to get results more quickly.

Only one of the regulators, the Office of the Comptroller of the Currency, is part of Treasury and must heed the behests of the secretary, while the other four — the Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Reserve — are independent agencies that don't necessarily have to pay attention to the political appointee heading Treasury.

But Dodd-Frank created a new super-regulator — the Financial Stability Oversight Council — which brings the heads of these agencies and other officials around a table under the chairmanship of that very appointee.

The main task of the new panel is to be on the alert for systemic threats to the nation's financial infrastructure and head off the kind of meltdown we experienced in 2008. For now, this also includes monitoring implementation of Dodd-Frank rules designed to fill gaps in regulation uncovered by the recent crisis.

The FSOC, in short, provides the secretary with a platform to, well, bully regulators into action. And in the case of the Volcker Rule, Lew did not hesitate to use it.

The day after he was sworn in to take Timothy Geithner's place at Treasury nine months ago, Lew surprised the regulators by summoning an FSOC working group to break through the turf battles and logjams that were besetting the Volcker Rule.

In July, L! ew increased the pressure with a public threat to look for alternatives if Dodd-Frank reforms, and especially the Volcker Rule, were not in place by the end of the year.

It made no sense to have five different versions of a Volcker Rule floating around so the objective from the outset was to hammer out a draft that all five regulators could sign on to. But this process inevitably became mired in competing claims as lobbyists worked to influence the weakest links in the chain.

Lew's tactic, according to a senior Treasury official who briefed reporters ahead of this week's unveiling of the finished rule, was to set the pace. It turns out, this official said, that people don't like coming to meetings with the Treasury secretary and confessing they've made no progress.

It appears that Lew's experience as a two-time director of the Office of Management and Budget, which entailed riding herd on the complex machinery of the federal government to get resolution of knotty budget issues, may have come in handy in driving this process as well.

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With neither a vote on any of the panels responsible nor the ability to intervene directly in their deliberations, Lew used the FSOC as a way to manage the process of getting the rule drafted.

The message for the future of financial regulation in the wake of Dodd-Frank is that a heckuva lot depends on who heads Treasury.

It is a setup that can work well, as in this instance, when the appointee at Treasury is a Democrat tasked with shepherding through legislation approved by Democratic majorities in both houses of Congress and signed into law by a Democratic president.

Geithner, however — who started his career as a Republican and only switched his affiliation to Independent when he was working at Treasury in the Clinton administration — was far less invested in implementing Dodd-Frank rules that put restrictio! ns on ban! ks.

As a result, these rules languished in the years following enactment of Dodd-Frank despite regular meetings of the FSOC. There was no bully in the pulpit, allowing the regulators to follow their bureaucratic meanderings and dilly-dally over the rules.

There were some in the debate over Dodd-Frank who wanted an independent chairman appointed to the FSOC for this very reason — to mitigate the role of politics in its actions.

What happens when someone who is ideologically inclined to deregulation becomes Treasury secretary and runs a much looser ship? Almost surely that will lead to fewer regulations and laxer enforcement of those on the books.

But that is perhaps the best way to manage financial regulation in a democracy. Dodd-Frank has created the mechanisms for forestalling future financial crises, but it is up to succeeding administrations — and the voters who put them in office – to use them.

Darrell Delamaide has reported on business and economics from New York, Paris, Berlin and Washington for Dow Jones news service, Barron's, Institutional Investor and Bloomberg News service, among others. He is the author of four books, including the financial thriller Gold.

Sysco Buys Rival US Foods for $3.5 Billion

David J. Phillip/APSysco's Houston corporate office. HOUSTON -- One of the largest food supply companies is buying one of its key rivals, creating an even larger, global distribution company. Sysco is buying privately held US Foods for about $3.5 billion in cash and stock. When the deal closes, Sysco expects the addition of US Foods to boost its annual sales by about 46 percent to around $65 billion. Sysco shares jumped as much as 26 percent Monday, setting an all-time high. Houston's Sysco will pay $3 billion in common stock and $500 million in cash. It will also assume or refinance about $4.7 billion in debt. That puts the total value of the deal at about $8.2 billion. Sysco President and CEO Bill DeLaney said that the two companies have highly complementary core strengths including large product portfolios. For the fiscal year that ended in June, Sysco's sales totaled $44.41 billion. It trucks food and cooking supplies to about 425,000 customers through 193 locations in the U.S., Bahamas, Canada, Ireland and Northern Ireland. US Foods' customers include independent and chain restaurants, health care and hospitality companies, and government and educational institutions. Major stakeholders in the company, based just outside of Chicago, in Rosemont, Ill., include Clayton, Dubilier & Rice and Kohlberg Kravis Roberts & Co. Representatives from both of those investment firms will join Sysco's board. When the deal closes, US Foods shareholders will own about 87 million shares, or about 13 percent, of Sysco's common stock. The buyout has been approved by the boards of both companies. Sysco said it expects the deal, which is set to close in the third calendar quarter of 2014, to immediately boost its profit after adjusting for acquisition-related costs and expenses. It's also expected to create annual cost savings of at least $600 million after three or four years. Moody's Investors Service placed all of Sysco's ratings, including its investment-grade "A1" long-term rating, under review for possible downgrade. Moody's said that while the deal makes sense and the price seems fair, a downgrade is likely given the amount of debt Sysco will assume. In midday trading, Sysco (SYY) shares rose $4.20, or 12 percent, to $38.53 after peaking at $43.39 earlier in the day. The company's shares have risen about 8 percent since the beginning of this year. Pre-made soups can contain a large number of ingredients containing GMOs. For instance, Campbell's (CPB) popular condensed Tomato Soup lists high fructose corn syrup as its second biggest ingredient. According to the Non-GMO Project, nearly 88 percent of all corn planted in the United States is GMO.