Question: I'm thinking of buying shares of Southwest Airlines. Is this a good idea?

A BuyandHolder

Answer:

Dear BuyandHolder,

I cannot give you specific advice about stocks - due to the SEC ruling of "know thy customer." All financial advisors must know a client's net worth, financial responsibilities, age, employment situation, savings and tolerance for risk before recommending the purchase or sale of a stock.

However, I can give you some guidelines to consider when making changes in your portfolio.

• The industry. Take time to study the overall airline industry prior to making an investment decision. You'll find in-depth coverage in Value Line Investment Survey, available at many public libraries (www.valueline.com). This independently published research service updates information on the major industries on a weekly basis. You'll also find easy-to-understand evaluations of the individual airline companies, written by expert analysts.
  
  
• Fuel prices. Profits in the transportation industry are closely tied to the cost of fuel. Any decline in prices is an obvious positive for the airlines. A group called Oil Price Information Service (www.opisnet.com), headquartered in Rockville, MD, tracks the details. You'll find their results continually reported in the financial news.
  
  
• Weather. This may seem obvious and it is, yet the obvious should not be overlooked. Airline carriers that fly into "snowy" areas face severe problems and extra costs as we well know from the recent snow storms in Denver. On the other hand, overall global warming bodes well for the industry as a whole, increasing passenger demand for flights and reducing the number of cancelled and/or delayed flights.
  
  
• Strikes and walk-outs. When management faces across-the-board personnel and labor problems, it costs the company money. A strong management team is key to averting such employee relations issues.
  
  
• Cost cutting. As with any industry, an ability to keep expenses at a minimum translates into a positive bottom line. Study the annual reports of the individual carriers as well as the evaluations in Value Line. Doing so will help you determine which of the carriers is on top of the situation.
  
  
• Expansion. Airline carriers are not the only companies that have expanded too quickly. Over the years, investors have seen a number of companies in differing industries fail due in part to growing too rapidly. Look for carriers that can resist this pressure, limit their growth and keep in the black.

Good luck!

BUYandHOLD does not recommend any securities. The security mentioned above is being used for informational purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy.