Out Fox The $treet

In the business of buying, leasing, and eventually selling multimillion-dollar machines, the ability to buy and sell at the right time can be as crucial as leasing the machine for a profit during the holding period. In the case of AerCap Holdings ( NYSE: AER     ) , the management team has consistently done an excellent job of acquiring planes through alternative methods rather than paying high prices directly to airplane manufactures and selling the planes at profits before they become outdated and difficult to unload. Due to key mergers and acquisitions over the years, AerCap Holdings has built itself up to one of the largest airplane leasing firms in the world. The company currently owns or manages 368 aircraft with an average age of 5.3 years and a lease term of 6.6 years. Not only has management been successful at plane trading, but it also was successful in buying debt at a discount and repurchasing shares substantially below book value. Read the full ...

As an airplane leasing company, most investors probably envision the stock of AerCap Holdings ( NYSE: AER     ) trading inline with the airline industry. In fact though, it typically trades more like the financials so one should not be surprised that it currently trades below book value. The company is one of the largest airplane-leasing firms. Currently, only Air Lease Corporation ( NYSE: AL     ) trades with a larger market cap due its extremely fast growth from start up to the current level and a well respected management team that moved over from ILFC, a subsidiary of AIG . As AerCap finally trades closer to book value, investors face the interesting dilemma of whether this stock should trade closer to historical values of multiples of book value or if a new normal exists. Read the full article here . Disclosure: Long AER. Please review the disclaimer page for more details. 

News came out from Flightglobal today that AerCap Holdings (AER) has placed itself on the auction block. With the stock floundering in the $10-12 range for the last few years, it wouldn't surprise me if big investors would be willing to walk away with a sizable premium. AerCap is the world`s leading independent aircraft leasing company and has one of the youngest fleets in the industry. AerCap has a portfolio of 350 aircraft with a focus on fuel-efficient narrowbodies and widebodies. AerCap is a New York Stock Exchange-listed company (AER) headquartered in The Netherlands with offices in Ireland, the United States, China, Singapore, and the United Arab Emirates. The stock is currently trading up 15% so clearly enough people believe the deal is on the table. Or at least the deal news has brought attention to the stock trading significantly below book value. Once aircraft values are marked up to current appraisal levels, the company might fetch closer to $20 then the sugges...

While the stock price for AerCap Holdings (AER) continues to suggest business remains soft, AER leases plane after plane on very long term leases. The Q3 transaction report released today shows that the average lease term of 3 new planes was 138 months (11.5 years). Hard to find a more reliable business then one with desirable assets on contract for over 11 years. Yet investors still aren't willing to pay much more then 6x earnings while the company continues to grow much faster then 10%. Q3 transactions weren't particularly special compared to past results yet they show continued, stable growth. The industry has rebounded from the lows in 2009d with even O'Hara airport in Chicago reporting record passengers for September. Airlines continue to lack the financial leverage to buy planes outright so the leasing business is set for continued growth. AER is becoming the premier public leasing company. Management remained aggressive during the global recession by purchasing Gen...

Coventry Health Care (CVH), Teradyne (TER), Foster Wheeler (FWLT) The market has become increasingly technically driven making investment decisions based on fundamentals virtually worthless. Too many investors feel the fundamentals could collapse with a double dip just as they did in 2008. As I wrote in a previous entry [Coventry Health Ups Guidance - Stock Limps Higher], even a company showing fundamental improvements is ignored by the market. CVH trades at a 7 PE multiple which in normal environments would be 2-3x higher. James Altucher published a piece in the Wall Street Journal highlighting 7 reasons why the SP500 could hit 1,500. Nearly a 40% gain from the current levels. He highlighted several reasons regarding the strength in corporate profits something that is historically important to stock prices. When the market stabilizes, profits will once again become important so its key to understand where the market could go based on current projections. Corporate Profits at Record H...

AerCap (AER) continues to develiver planes, sign leases, and buy new planes. The market continues to ignore the continous progress in growing operations. AER released its Q2 transactions report today showing 18 new deliveries and the purchase of 19 planes plus contracts to buy 9 more. AER trades at 5.5x earnings and regularly trades in whipsaw fashion though the company continues to plod along with limited risk. The market percieves a much bigger risk then the reality. AER and Genesis Lease (GLS) survived the financial crisis with limited impact. They've had only slightly material impacts from the Great Recession and yet they can't get traction in the market. Not that its all that surprising considering the general market and Stone Fox Capital owns several other stocks with similar valuations. The CEO continues to remain very positive on the economy and specifically Europe considering their Headquarters in the Netherlands. After all he was very bullish of Europe during the Q1 C...

AerCap Holdings (AER) reported strong results before the market opened on Friday. Naturally with panic regarding Greece, they went widely unnoticed. In fact the stock continued its massive decline as investors feared contagion dampening the key European market. AER remains the largest holding in the Growth Portfolio and returned to that title in the Opportunistic Portfolio as we added shares around $11.4 on Friday on the swoon. Could contagion spread causing a Eurozone collapse...Yes... Will it happen... Unlikely. Greece is a completely different animal compared to the other PIIGS and very likely a one-off situation. AER has direct exposure of 2 planes to one customer in Greece. Some comments from the Earnings Conference Call from the CEO. Listen from roughly around the 23 minute point (or 4:30 of the Q&A section) and listen to the response regarding the Greece contagion fears. CEO expects a repeat performance of Dubai and jokes about the 200 protesters on the Greece capital ( lat...

After such a reversal yesterday its surprising to see the market up much less 3 stocks that we own in the Growth and Opportunistic Portfolios hitting new 52 week highs today. Especially considering the reversal on Apple (AAPL) yesterday seemed to foretell lower prices. AerCap (AER) and Sears Holdings (SHLD) remain very cheap value plays while AAPL would be considered a cheap growth stock. Not sure I'd chase them today, but it further highlights how stock selection can beat the market.

Finally the merger between AerCap Holdings (AER) and Genesis Lease (GLS) will be finalized today creating the largest independent airplane leasing company. Its also creates a earnings powerhouse. For 2010, they expect to earn well over $2 with the stock trading below $11 now. A PE of 5 is absurd now that global growth has returned and most of their customers should see growth even in the US market. Not to mention that 5 years earnings growth is placed at 12.5% meaning a fair valuation would be around $25. The finalization of this merger should hopefully bring much more focus to how cheap the combined entity remains. Both stocks have rallied big time since the March 2009 lows, but they still remain insanely cheap on a historical basis. The risks of airlines going bankrupt is greatly reduced now that the financial crisis is largely over. Also, the inability of Boeing (BE) to produce its new plane has helped reduce the competition for their existing planes. It will now be years before th...

AerCap (AER) has one amazing chart over the last couple of months. The merger with Genesis Lease (GLS) should be finalized on the 25th reducing the risk and finally allowing the stock to move forward. Hard to understand what caused the stock to collapse from $11 to $7.5 and then rebound right back to $11 today. Is it now a double top? Likely not, but it does need to consolidate the recent gains. See the RF chart from yesterday as thats the likely scenario for this stock. Trading at only 5.5x the $2 in earnings expected this year the stop at $11 will likely only be short term if at all. Disclosure: Long AER and GLS

Anybody just focusing on domestic US traffic would miss how the rest of the world is seeing explosive growth in airplane traffic. For airplane lessors it's mostly about international growth and with Boeing continuing to struggle to get their new plane out it just makes the planes owned by lessors like AerCap (AER) and Genesis Lease (GLS) more valuable. Below is a couple of examples of the explosive growth seen outside the US and in places other then China and India. LAN Airlines (IFL) is one of the leading airlines in Latin America with a dominant position in Chile and Peru plus operations in Argentina and Ecuador. They reported a huge 11.9% increase in system traffic for September. System passenger traffic for September increased 11.9% as capacity rose 9.3%. As a result, the Company's load factor increased 1.8 points to 78.8%. International passenger traffic accounted for approximately 71% of total passenger traffic. Domestic passenger traffic in Chile, Argentina, Peru and Ec...