But A Lot Of Brokers Say Now's The Time

If you play the stock market, chances are you have a more-than-passing interest in aviation stocks. Chances are equally as good that you've watched with dismay the sell off in airline stocks -- some of which are down as much as 25-percent this year alone (it's only March).

Blame rising fuel costs, blame Delta's reorganization and the new level of competition it's created in the industry. But ever since 9/11, airline stocks have taken a beating.

That may be about to end.

The Wall Street Journal says more and more investors think the market has overreacted to these developments and, as a result, airline stocks are now undervalued. Some even suggest that jumping on the airline bandwagon now could bring returns as high as 30-percent over the next year.

"We think the recent sell off has created a buying opportunity for some of the names, especially airlines that could benefit from catalysts outside of lower fuel prices and/or further contraction of US Airways," said Merrill Lynch analyst Mike Linenberg in a recent research report quoted by the WSJ.

For example, Linenberg thinks America West stock will hit $7.00 a share over the next ten months... a 39% increase over Friday's closing value. Merrill Lynch has upgraded AmWest, Continental, and AirTran Holdings from "neutral" to "buy."

But the marketplace hasn't been kind to airline investors over the past 20 years and a lot of potential stock buyers could be skittish as a result. Still, consider the case of AMR -- American Airlines' parent company. It was on the brink of Chapter 11 bankruptcy just two years ago, its stock price down to $1.41 in March 2003. Just three months later, after making cost-cutting deals with its unions and losing CEO Don Carty, the airline's stock was worth $11.32 a share, according to the Journal.

FMI: AMEX Airline Stock Index