We all do dumb things, and that’s surely true of a good number of the country’s more than 80 million stock players.

Renay Holtzman figures she may be among the bumblers. In a recent e-mail, she wrote: “Dan, I really know nothing at all about short selling” – a bet a stock will go down in price, rather than go up – “but my broker convinced me to do that with Southwest Airlines. It was stupid of me to have listened to him because I am already out more than $2,000. I notice you sometimes respond to questions from readers and I wonder if you would be good enough to give me your opinion on Southwest.”

First, Ms. Holtzman, your broker is by no means alone in that bearish view of Southwest. The latest figures on the carrier, as of mid-May, show a short interest position of 12.53 million shares, a hefty 27% rise from the previous month’s short stake of 9.8 million shares.

So it’s clear worrywarts abound. More precisely, a combination of high fuel prices, industry overcapacity, fierce competition, a surge in discount fares, worries about a slowing second half economy,and some big-name bankruptcies (Delta, United, and Northwest) are prompting many investors to take a dim view of Southwest and other carriers.

Not every Wall Street pro thinks Southwest has run out of gas. There are also bulls, including Standard & Poors’s airline tracker, Jim Corridore. His basic view: The bears are way off course; they should be buying Southwest, not shorting it. He sees positive fundamentals that lead him to conclude the stock will take off to $20 over the next 12 months, about a 25% gain from current levels.

Why so? For starters, he points out that Southwest, the premier low-fare carrier, has had 33 consecutive profitable years, giving it balance-sheet strength unmatched by any other American airline. He also notes that nofrills Southwest, which posted revenues last year of $7.5 billion,has what he considers a conservative debt-to-total capitalization ratio of less than 40%, which, he contends, gives it the financial flexibility to maintain high revenue and capacity growth over the next few years.

What about those killing high oil prices? The analyst observes that the company’s oil hedge position is the best in the American airline industry; Southwest is hedged for its 2006 jet fuel requirements at an oil price of $36 a barrel. (The current price is around $70 a barrel.)

However, because Southwest was hedged in 2005 at about $26 a barrel, the company is actually likely to experience faster fuel cost growth than the rest of the industry. Mr. Corridore says he thinks, though, that the carrier will be able to counter this with ongoing productivity improvements and modest airfare hikes.

Spurred by strong travel demand, capacity cuts by competitors, and fare increases, the analyst pegs Southwest’s 2006 revenue growth at 11%. But given the likely rise in fuel costs (which represent roughly 26% of an airline’s costs), this year’s per-share earnings growth is expected to be tempered somewhat, though still climb about 12%, to 75 cents a share, from 67 cents in 2005. For 2007, projections call for another gain of about 13%, to 85 cents.

Mr. Corridore’s $20 target price values the stock at 24 times his 2007 earnings estimate, which is above the peer average but at the low end of Southwest’s historical p/e range.

The analyst may well be correct in his bullish view of Southwest, but it strikes me there’s no way investors should blithely ignore the cautionary words of Warren Buffett, who described his previous foray into the commercial airline industry as “temporary insanity.”Or, for that matter, those of Carl Icahn (onetime skipper of Trans World Airlines), who once told me: “You got to be out of your mind to own an airline stock.”

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More termites: The news is getting progressively worse for the owners of homebuilding stocks. Industry tracker Dan Oppenheim of Banc of America Securities is telling clients his monthly survey of more than 250 real estate agents found homebuilding conditions worsened in May, with the findings pointing to flat or falling prices in 15 of 21 markets versus April. All told, 39% of the agents surveyed said home prices were flat, and just 16% reported increases. Agents noted that more time was needed to sell a home in May, indicating that incrementally the market saw more supply than demand, which could further pressure home prices in coming months. Mr. Oppenheim’s least favorable homebuilding stocks, each of which he rates a sell, are Meritage Homes ($447.83), NVR Incorporated, ($530.35) and Toll Brothers ($26.05).

dandordan@aol.com