Best Seattle-area stock since 2008? (Surprise, it’s not Amazon)

Apr 1, 2013

Sure, Amazon shares have done well over the past five years—up about 245 percent. And people fortunate enough to have bought Starbucks stock in March 2008 have seen their shares climb about 200 percent.

But the real standout stock in the Seattle area is Alaska Air Group. The shares have climbed more than 500 percent in the past five years.

And one analyst says they’re still undervalued compared to other airlines.

Why is that? CRT Capital Group analyst Mike Derchin says it’s because people still think of the airline as a West Coast regional airline. But that doesn’t reflect the company today.

Hawaii, East Coast

Alaska Air has added routes as far east as Boston and as far west as Kauai and Honolulu. In fact, Derchin says a big reason why the company (and the stock) has done so well in recent years is the expansion into Hawaii in 2007.

“Frequent fliers all of a sudden had a reason to fly a lot more on Alaska for business reasons,” Derchin said. “In other words, the more miles they accumulate on Alaska, the quicker they get a free trip to take their wife and kids to Hawaii.”

Derchin says the expansion also transformed Alaska into less of a seasonal company, no longer so dependent on summer travelers. The New York Times recently published an interesting feature about Alaska Air and how it’s mastered the challenges of flying into tough terrain in the 49th state.

“It’s a company that can now make money in all four quarters of the year whereas in the old days, Alaska could only make money in the second and third quarters,” he said.

Other reasons for the company’s success? Derchin says it standardized its fleet with Boeing 737s. That allowed Alaska to fly long-haul routes more efficiently and simplified training.

Cost-cutting

The company has also been focused on cutting costs and using technology, such as check-in kiosks. Derchin says Alaska adopted profit-sharing, which he calls “creative” and “enlightened.”

Still, cost-cutting has taken a toll on some people. Just last week, more than 1,000 Sea-Tac airport workers announced they’ve joined unions. The workers are employed by contractors such as Menzies Aviation and Delta Global Services and say they’re paid “poverty wages” – many earn less than $10 an hour.

According to the Seattle Times, Alaska in 2005 laid off 472 union workers who handled baggage and other ramp operations and then subcontracted the work to Menzies, a British company.

Spokespeople for Menzies and Delta Global Services declined to comment on the news that the workers have unionized. The workers are also trying to put pressure on Alaska Air, saying the company should require that its contractors pay higher wages. An Alaska spokeswoman had no comment except to say that this is something for the contractors and their employees to sort out.

Other standout stocks

If you’re wondering what other Seattle-area stocks have done well in the past five years, take a look at F5 Networks. Shares of the network technology company have climbed about 390 percent in the past five years. And Clearwater Paper Corp. shares have jumped about 360 percent in that time period.

Boeing stock is up 14 percent in the past five years. Microsoft shares are down about 3 percent.