A Southwest Airlines jet waits on the tarmac at Denver International Airport in Denver in this file photo taken January 22, 2014 © RICK WILKING, Newscom, Reuters

Compiled from StockScouter ratings by Verus Analytics

After years of bankruptcies, mergers and misery, shares of America's airlines -- the few that are left, that is -- have finally taken off in the past two years, riding the updraft of the economic recovery. As Kiplinger’s Tom Petruno writes, "Reduced competition amid rising demand for seats has given the survivors a greater ability to raise fares -- and to impose an array of annoying fees."  

Southwest Airlines (LUV), for example, has soared 58 percent year to date and is up more than 100 percent in the past 12 months. The Dallas-based discount carrier flew into StockScouter's Top 10 portfolio a few weeks ago, after reporting a whopping 108 percent increase in second-quarter earnings -- and has been circling there ever since

While investors have cheered the company's earnings growth – analysts expect profits to rise another 59 percent next year -- Southwest also wins accolades from consumers and its employees alike: It ranks among the best companies to work for and No. 2 among the big airlines in customer satisfaction, behind only JetBlue (JBLU).

Southwest Airlines receives a '10' from the StockScouter rating system on MSN Money, the highest score possible. Based on StockScouter’s analysis, shares of Southwest are expected to significantly outperform the market over the next six months with less than average risk.

Read the full Scouter report on Southwest Airlines here

StockScouter Top 10 for Aug. 15, 2014

Company

Sector

Dividend yield

Forward P/E

Scouter score

Activision Blizzard (ATVI)

Video games

0.9%

16.6

10

Cognizant Technology Solutions (CTSH)

Information technology

NA

15.810

Southwest Airlines (LUV)

Airlines

0.8%

15.5

10

Nvidia (NVDA)

Semiconductors1.8%14.710

Symantec (SYMC)

Software2.5%11.810

Teva Pharmaceutical Industries (TEVA)

Drug manufacturers

2.3%

10.4

10

Taiwan Semiconductor Manufacturing (TSM)

Semiconductors

2.0%

64.8

10

ConocoPhillips (COP)

Oil and gas

3.6%

12.5

9

Occidental Petroleum (OXY)

Oil and gas

2.9%

13.6

9

Texas Instruments (TXN)

Semiconductors

2.6%

17.1

9

StockScouter beats the market

We think the StockScouter rating system developed by Verus Analytics for MSN Money is one of the best tools you can use when you're trying to decide where to invest.

StockScouter looks for stocks whose business fundamentals, price behavior, valuation and stock-ownership characteristics appear to predict a rising price in the future, based on how those factors have influenced stock prices in the past.

The system assigns each stock an expected six-month return and balances that return against the stock's expected volatility.

Scouter rates stocks on a scale of 1 to 10, and ratings can change daily. Ratings and data in the chart above were current as of this article's publication date.

Click here to become a fan of MSN Money on Facebook

In addition to the daily top 10 list described above, StockScouter is used by investment research firm Verus Analytics (previously known as the quantitative business unit of Gradient Analytics) to generate a monthly benchmark portfolio of stocks that, refreshed monthly, has outperformed the market since its inception in August 2001.

An investor who began in 2001 by investing in each of the benchmark portfolio's top 10 stocks at the start of the month, selling them at the end of the month and then starting fresh with a new group of 10 stocks, would have generated returns, before trading costs and taxes, of 1,084 percent through June 30, 2014.

Writer Jon Markman, at the time a columnist for MSN Money, collaborated with company researchers on the tool.

Markman suggested rolling over the top 10 stocks every six months to hold down trading costs, a strategy that might be a better fit for most investors; that would yield different results, which would vary based on your starting point.

Performance through June 30, 2014

Full 50 position portfolio    

Index

1 month

3 month

6 month

1 year

Since
inception

Average
annual
return

Portfolio

3.9%

3.5%

5.7%

24.9%

617.5%

16.9%

Nasdaq

3.9%

5.0%

5.5%

29.5%

117.5%

8.1%

S&P 500

1.9%

4.7%

6.1%

22.0%

61.8%

4.9%

DJIA

0.7%

2.3%

1.5%

12.9%

59.9%

4.7%

Top 10 portfolio

Index

1 month

3 month

6 month

1 year

Since
inception

Average
annual return

Portfolio

2.3%

1.3%

3.9%

19.4%

1,084.2%

20.9%

Nasdaq

3.9%

5.0%

5.5%

29.5%

117.5%

8.1%

S&P 500

1.9%

4.7%

6.1%

22.0%

61.8%

4.9%

DJIA

0.7%

2.2%

1.5%

12.9%

59.9%

4.7%

Inception: August 2001