If you are travelling this holiday season (and even if you're not) you are probably keenly aware of the dire state the US airline industry is in. With American Airlines being the latest in a string of bankruptcies, all but three of the major US carriers have gone belly up over the last decade. Yet I am more than certain there will be long lines at the airport, and nary an empty seat on the next flight you take. Indeed, if you were the type of investor who likes to do fundamental research, as in roll up your sleeves and see what is happening on the ground (or in this case in the air) at the companies you're considering putting into your portfolio, you might make erroneous inferences when it comes to the financial health of the publicly traded airline you are travelling on.

And you would not be alone (which gets me to the point of this article.) Several wall street analysts downgraded AMR (the stock ticker and parent company of the airlines) to “sell” or “underperform” from “hold” upon the news of the airline’s filing for bankruptcy…and the stock’s plunging (as in, after the fact). So, to be clear, while the stock was dropping day after day for months on end, these highly paid analysts were recommending that you keep the stock in your portfolio (if that is not what“hold” means, I am not sure how helpful these rating systems are), and then once –as in after – the stock had spiraled down even more, they altered their opinion to sell. One analysts even brilliantly put a $0 price target as though that information did you a lot of good as followers of this advice rode the stock from a year to date high of nearly $9 per share to a stock trading for peanuts (or at least pennies.)

You would be surprised, although you should not be. Wall street analysts often tell their followers to sell after a stock has gone down materially, and to buy post a big run up. Indeed, many smart investors use analyst recommendations as contrarian indicators – as in, all things being equal, these prudent and rational traders do the oppositeof what the analysts say. Remember, many analysts still have conflicts of interest; they get paid by the very same companies (via hefty investing banking fees) they are supposed to be objectively analyzing. Even if no such conflict exists, analysts seem to be consistently late to the party.

So as you look to build out and manage your portfolio for 2012, be an independent thinker (or work with a professional who is.) Just because an analyst rates a company a buy should not give you carte blanche to load up. Further, as the great Warren Buffett says, just because the crowd believes something does not make it so. Airlines have a done a great job in the last decade in making air travel more efficient and secure. But as stocks they remain risky. Be safe this holiday season - both in the air and wallet.

(The information in this article is strictly for educational and illustrative purposes and is not an attempt to furnish personalized investment advice or services.)