Thomas Lott
Long/short equity, deep value, special situations, hedge fund manager

AerCap Holdings: At Some Point Valuations Matter

There have been numerous articles on AerCap (NYSE:AER) posted in the past few months touting the stock as a great long value idea. Despite that, the stock has dropped steadily from $50 last summer, to $28 today. From 8.5x earnings, the stock now trades at 4.5x 2016 earnings. While there have been plenty of articles explaining the solid nature of the industry (impressive ROEs through the cycle), in this piece I thought we would explore why the name has underperformed so dramatically, as well as examine a few downside scenarios.

I think the upside is easy to understand. Given historical earnings multiples in the 8-10x range and multiples of book value in the 0.90x-1.20x range, the target prices

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