Prime Stock Advisory Letter for November 6th, 1998

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Position Statement: In our Prime Recommendation Letter we attempt to identify the recommendation with the highest probability of moving higher.  We recommend that stop orders be placed at the time of purchase,  and once the position has moved profitable we recommend a stop be placed a minimum of 3/8th above the purchase price and moved higher as the position moves higher.

Today's Comments:  The overall market moved sharply higher yesterday.  The rally was broad based and most of the sector indices I track moved higher.  There was minor weakness in the Amex Natural Gas Index 'XNG'.  The healthcare,  financial,  and commodity based indices were the strongest on the day.  I am concerned about the high P/E ratio on the overall market and the fact that the earnings on the S&P 500 have declined by almost 5% over the past year.  But it seams that I may be the only the cares about the P/E ratio vs. the earnings growth rate.  Right now the overall political and economic environment remains positive and as a result the market should continue to go higher until something happens to remind us of reality.  The Bottom Line:  The overall market should move higher.

Keep an eye on Geron 'GERN' regarding positive news concerning medical research

Company:  Southwest Airlines Co.      Symbol: 'LUV'    Closing Price: $23.125/share.
YH: $23.75     YL: $14.50     EPS: $1.17        P/E: 19.7       Forecasted EPS: $1.27
Dividend: $0.03     Yield:  0.1%     Ex Dividend: 8/31/98
Price Target:  $28.875        Downside Stop:  $22.375
Options Recommendation: November 20 Calls,  Symbol 'LUVKD' @ $3.50/contract.

Company Description: This company is a major regional airline that is the process of expanding nationally.

Recent News:  11/4 Southwest Airlines to enter New York Market
11/4  Southwest Airlines October traffic rose 7.7%
11/4  Southwest Airlines October load factor 64.6% vs. 63.1%

Our Analysis: Southwest Airlines is a component of the Philadelphia Airline Index 'PLN, the Amex Airline Index 'XAL',  and the S&P Transportation Index 'TRX'.  I have rated all three of these indices as moving higher from their current levels.  The shares of 'LUV' set a new closing high yesterday.  In the process they completed a cup pattern with a measured move to our stated price target.  Southwest Airlines recently announced it was moving into the New York market.
 

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