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Boring industry? Check.Underfollowed? Check.Great management? Check.Fantastic value? Check.Estimated intrinsic value of $85Estimated rate of return 125%
Estimated intrinsic value of $78.
Projected 20% annual growth over the next five years.
Because people need airplanes. Sometimes without committing to the entire ownership of the airplane.
Deej. This is second time around for billionaire CEO in same business and seems to have it all lined up. Now watch it burst into flames and fall on my house.
Airlease competes against FLY, AER, AYR in jet leasing space.
Leases out airliners to small countries so Turkistan can have a national airline.
Interesting business model. Remind me of SSW. Buy/build, finance with debt, lease long with a focus on energy efficiency.http://www.fool.com/investing/general/2013/10/10/the-best-stock-in-the-aircraft-leasing-industry.aspx?source=itxsitmot0000001&lidx=1
I became aware of ILFC many years ago because one of my best friends was an executive there for many years. I think he had one of the coolest jobs ever, flying around the world doing deals to either lease or sometimes repo jet aircraft. AL is led by the same team that built ILFC into a company that competed with GE Capital to lease aircraft worldwide. I believe in management.
Intrigued by this. Came on my radar from the October Stock Roundtable. Digging in further. Interesting.
As global passenger flows increase the entire industry of aircraft leasing should benefit.
Lot's of positive talk about the Founder who had already done Airline Leasing with another company he successfully sold.Books look good. Airlines need more fuel efficient planes and AL is there to lease them out. Just like leasing a car for a business.
The type of special situation that I am going to use for this pick is called a jockey play. That means that you find an entrepreneur who has successfully started a business in the past and sold it for a large profit who is starting a new venture that you can get in on on the ground floor.Air Lease is an airplane financing company that went public in April of last year at a higher price than it is trading at today. It was started by Steven Udvar-Hazy, who previously started a similar company called International Lease Finance and sold it to AIG.I am personally somewhat familiar with the airplane leasing industry from my previous foray into International Lease Finance distressed bonds that I purchased during the credit crisis. I can tell you that massive recessions are not kind to airline leasing companies :). I was sweating my investment in the bonds at the time, but things eventually turned OK.Flash forward to today and Udvar-Hazy is attempting to recreate the magic with a new airplane leasing venture. The new company seems to have a decent tailwind so to speak in that the terrible airline industry is doing about as well as it is ever going to. Add to that the need for air carriers to purchase more efficient planes in today's relatively high cost fuel environment and there should be plenty of business for AL. In fact, Air Lease has significant orders on the books already for new planes over next three years. These orders alone should cause the company's earnings to rise from $1.20 in 2012 to $2 in 2013 and $3 in 2014. That's some pretty solid visibility into excellent earnings growth. At a multiple of only 15 times that 2014 earnings estimate, down from the 21 times that AL trades at today, the stock would be a double from its current level.So what could go wrong? Well, the main thing would be another recession that would cause airlines to cancel these orders before they take delivery of the planes. If you're optimistic about the economy, as I am, then this shouldn't be an issue.This isn't my typical value-type of stock pick, but a jockey play is a special situation that I will venture outside the value world for.This idea comes courtes of John Osterweis of Osterweis Capital via an interview that he recently did with the excellent publication Value Investing Insight.Deej
Of course I would get caught with a high entry price thanks to my CAPScall in a recent article. But hey, I'm all about accountability! It won't matter long-term anyway. Where to start? I'll post a few reasons as to why I believe Air Lease is a tremendous growth opportunity and slap a link to the 1,000 word article at the bottom for you to peruse for a more thorough analysis.The company has a PEG of about 0.47, which speaks for itself. You may not believe a 20% per annum growth rate for the next five years, but consider that the company has about one-third of its planned aircraft fleet in hand. After jumping from 40 aircraft at the end of 2010 to 152 (expected) by the end of 2012 the company gets the benefit of the doubt from me. Management is tremendous. In fact, there is probably no one investors would rather have at the helm of an air leasing company than Steven Udvar-Hazy (see article). He practically built the industry.Fuel efficient aircraft will be in high demand as airlines strive to cut costs, emissions, and upgrade/replace older aircraft in their fleet. In emerging markets - where Air Lease has over 50% of its fleet - airlines have less power at the bargaining table because there is less access to capital, so companies like Air Lease can wrestle out more favorable terms for now.I'll write more about Air Lease in the future. I would like to learn more about the company's debt and dive deeper into the drawbacks of an investment. Nonetheless, I believe this is a great hidden growth opportunity.My recent article:http://www.fool.com/investing/general/2013/01/21/is-boeings-battery-good-news-for-air-lease.aspx
new entrant, experienced mgt, largest 2 incumbents (GE and AIG) are cutting back, % of planes leased is increasing (mkt growing)
Wow. I just cannot be the only one to say no. Too good of a company.
9/2/2011 22.27 good reputation, shares are 15-20% off their IPO price.
One word- Management.
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