David Gardner’s Top 3 Stocks

David likes this first company so much he has recommended it to readers twice this year! In his mid-year review, David re-upped on his recommendation from the March issue, JetBlue (Nasdaq:JBLU). Here’s what he had to say: JetBlue combines all the key elements that I look for in a stock: a great business model (charge less, make more!), great management, major growth opportunity, and a consumer brand that has "the love." The competition is weak -- in many cases near bankrupt -- and is being hurt badly by higher oil prices. JetBlue, on the other hand, bought some of its oil on the futures market, so it's paying 2003 prices for some of its 2004 oil (again, great management).

With a bunch of new, smaller Embraer jets beginning to show up this year, JetBlue is positioning itself for dramatic growth. And I love that it fights against the old saw that you can't make money in the airline sector (Southwest has proven this can be dramatically wrong).

JetBlue leads the industry in "load factor," or the percentage of seats that are sold. That number declined somewhat in May, causing Prudential to cut earnings estimates from 85 cents to 77 cents per share for the year. That puts a P/E ratio on this stock of 36, which is not cheap. Then again, how many other airlines are growing in excess of 20% per year, sustainably? And how many great consumer brands backed by cash-flow streams ever look cheap? They rarely if ever do, and yet often wind up being stocks that dramatically outperform the market over long periods.

We've earned some outstanding profits on stocks I've re-recommended. I feel really good about JetBlue here as a core holding in your long-term portfolios. Up, up and away!

This second stock recently reported fourth quarter and year-end earnings substantially ahead of last year’s numbers. In his mid-year review, David said: FedEx (NYSE: FDX) has done what I expected it to -- beat the market (by a count of 37% to 16%) since my recommendation in February 2003. I really believe this is as near as you can get to a "buy-and-forget-about-it" stock over the next 10 years. No one is going to come along anytime soon and take these logistics-enabled profits away, and the growth of China should represent a real boon for FedEx. Vietnam veteran Fred Smith (who flew over 200 missions there) is one of my five favorite CEOs because he is one smart capitalist, and a principled man. Buy FedEx and expect to hold it for a long time. I love these guys.

And finally, David gave this third company an A- for both business strength and price valuation – the only company in the mid-year review to get all A’s. Here’s why: Marvel (NYSE:MVL) since our last update six months ago, is up another 12%, doubling the market's return over that time. At times, it was up over 30% during that period; this is a volatile stock! Spider-Man 2 is everyone's focus right now, a sure blockbuster. The reason I like this investment, though, is because the hits keep on coming. Fantastic Four next year should be another home run, as should the videogame X-Men Legends coming out from Activision this fall. And then how about another great X-Men movie in 2006? And the next Spider-Man? Et cetera.

In other words, conventional wisdom says this is a one-trick pony stock, but I see Marvel continuing to earn those obscenely high profit margins on the backs of lots of ponies. Yes, I would buy here, today.