Dothemathman

Dothemathman
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  • Bear Market Deja Vu: Aircastle Limited  [View article]
    The earnings report was obviously strong, however, the market does not seem to regard the gains on sale of aircraft as continuing. If one adjusts the accounting to exclude those gains, and applies the current industry multiple of 8.7 PE then one arrives at a price for the shares of about $16....low and behold. I think this question of the continuing nature of gains on sales of aircraft is an industry wide valuation matter and it explains, in significant part, the otherwise large variation in nominal PE differences among AER, AL, AYR and FLY. Having said that, adjusting for this factor it appears that AL is seriously over valued, while AER is seriously under valued. This is a tricky area, and I will continue to examine it closely. The next one to report is AER.
    Feb 11, 2016. 03:58 PM | 1 Like Like |Link to Comment
  • Comparative Analysis On The Best Stock In The Aircraft Leasing Industry  [View article]
    Biz: The future certainty of aircraft leasing revenues is not substantially different that than of a good bank. In fact, if anything, the future revenues of aircraft leasing are more risky than that of a good bank because the large bank is much better diversified as to industry risk. Of course, both banks and leasing companies have credit risk exposure to their borrowers. I still say that a large well diversified bank is less risky than an aircraft lessor. The industry concentration and the exposure to residual value risk is the increment of risk of aircraft leasing relative to banks.
    As to growth, both industries have growth opportunity but the growth opportunity of aircraft leasing is concentrated as to industry risk and a good bank is diversified as to industry risk. So, again the good bank is less risky than the aircraft lessor.
    Feb 9, 2016. 02:38 PM | 1 Like Like |Link to Comment
  • Comparative Analysis On The Best Stock In The Aircraft Leasing Industry  [View article]
    AL and AYR appear fully valued to me. The devastation wrought on AER has made it ridiculously under valued. FLY has been trading very cheaply for quite some time, and remains as under valued as AER.

    Aircraft leasing is basically a business of banking, with the added risk of residual value risk. The depreciation expense is a real cash cost because the life span of the aircraft are quite determinable. So, IMO, the industry should trade at a PE somewhat lower than a good bank. The present PE's of AL and AYR are about 9 to 9.5. This is appropriate. The PE's of AER and FLY are around 5. That is ridiculously cheap, IMO. I can see no solid reason for AER and FLY to be so discounted relative to AL and AYR.
    Feb 9, 2016. 11:47 AM | 1 Like Like |Link to Comment
  • AerCap Holdings: At Some Point Valuations Matter  [View article]
    I wonder if maybe the hedge funds are still selling AER because they only have to meet redemption demands after some number of days, say 60 on an estimated basis and then they make a final payment for 100% withdrawals only after the final year end audit is completed. I make this comment because AER was absolutely creamed today.
    Feb 8, 2016. 04:22 PM | 1 Like Like |Link to Comment
  • AerCap Holdings: At Some Point Valuations Matter  [View article]
    dtc: Can you offer a theory about why AER is the worse performing stock recently of the group of four: AL, AYR, AER and FLY?
    Feb 8, 2016. 12:28 PM | Likes Like |Link to Comment
  • AerCap Holdings: At Some Point Valuations Matter  [View article]
    I recommend looking at the 30 day and the 5 day charts of the 4 players relative to each other: AER, AL, AYR and FLY. I think that the relative performance of FLY in the recent week or two is very notable. My suspicion is that FLY may be about to put itself into play. I hope so, as I have a big long in FLY. FLY is worth twice its current price, and to buy it at $700 million is a snack for any of the three larger players. My theory is that the whole large self tender was preparation to put itself up for sale. I have no inside information. That is just my theory and my hope, as I am long, and that is why I am long.
    Feb 5, 2016. 12:22 PM | Likes Like |Link to Comment
  • AerCap Holdings: At Some Point Valuations Matter  [View article]
    I agree completely with your analysis. I remain bewildered by the price of AER and FLY. AYR and AL trade at about a 9 PE, which seems reasonable. I wonder if the sheer poor chart pattern is enough to scare away investors. Eventually, the value will out, IMO. However, the wait is tedious and annoying.
    Feb 5, 2016. 05:53 AM | 2 Likes Like |Link to Comment
  • Gilead Sciences: Don't Get Your Shorts All Twisted Up  [View article]
    spike: The risk is that the political palaver just drags it down further.
    Feb 1, 2016. 03:39 PM | Likes Like |Link to Comment
  • Gilead: There Is No Silver Lining To Zepatier, Time To Sell  [View article]
    Mathematically, it is not difficult to arrive at a current fair value for Gilead. One need only assume a moderate earnings decline for the current and next year. Indeed, one can see $78 or so. Now, that assumption of a moderate earnings decline may be incorrect, but that is in fact the view of the market at the current price of Gilead, IMO. I am out of the stock.
    Jan 29, 2016. 12:10 PM | Likes Like |Link to Comment
  • Gilead: There Is No Silver Lining To Zepatier, Time To Sell  [View article]
    I doubt that it matters whether Merck's product is actually comparable to Harvoni. The market will sell the stock down due to the competitive price risk. Until it is proven that there will be no risk, the market will assume the risk is there. Furthermore, the political risk will likely continue to escalate. I do not know how far down Gilead will go, but it will very likely go further down., unless Gilead pulls a rabbit out of its hat.
    Jan 29, 2016. 11:00 AM | 5 Likes Like |Link to Comment
  • Fly AerCap! ... 'Best In Class' Financial Services Provider To The Commercial Aviation Industry  [View article]
    Boeing is cutting back its production schedule. This would seem to reduce availability of new aircraft and thereby reduce the perception of an over supply of older wide body aircraft that has been alleged. Why is this bearish for aircraft leasing?
    Jan 27, 2016. 09:09 AM | Likes Like |Link to Comment
  • Fly AerCap! ... 'Best In Class' Financial Services Provider To The Commercial Aviation Industry  [View article]
    Bill Kort: I think your explanations are not valid. First, the sale of ILFC shares by AIG is now long ago. Furthermore, the interest spread (like a bank) that AER has is no different than their competitors like AL and AYR, yet these companies trade at much higher multiples. The idea that a lot of hedge funds owned AER has some credibility but only for so long, and that time is long gone. There is something else going on here. I am not satisfied that your points are explanatory. I think AER is just plain under valued.
    Jan 23, 2016. 05:50 PM | Likes Like |Link to Comment
  • Aercap: An Incredible Bargain Hiding In Plain Sight, 40-50% Upside (For Starters)  [View article]
    There is a mystery here that I do not understand. In my view of examining the valuation metrics in this industry, depreciation is a true cash cost because the aircraft have a clear and rather well known usable life. So, like a bank, the PE multiple is indeed the most appropriate valuation metric. In addition, I do not see any particular reason to expect significant seasonality to this business of leasing out aircraft. Therefore a simple times four of the expected quarter earnings is a reasonable basis. The four players I have examined are FLY, AL, AYR and AER. The PE multiple of AYR and AL are 11 and 9.2 respectively. These numbers seem quite reasonable and are consistent with banks that have somewhat higher risk. This assessment also seems reasonable, IMO. However, FLY and AER trade at a multiple of 5 to 5.5.
    I see no particular reason to think that AER and FLY are substantially different or more risky than AL and AYR. They are all basically in the same industry. AL operates within the US tax jurisdiction, and the others operate in lower tax jurisdictions, but net profit is net profit. FLY is smaller and AER is bigger, but they still all operate in a globally competitive business. They all have similar capital structures that are similar to banks.
    It is a mystery to me. As far as I can tell FLY and AER are ridiculously cheap.
    Jan 23, 2016. 09:43 AM | Likes Like |Link to Comment
  • How America's Shale Revolution Has Reduced Geopolitical And Price Risk  [View article]
    I think these comments are good and helpful. It is widely reported that the full cost of shale oil varies significantly among the various formations. So, I would guess that if the oil price rallies to some level like $60 (just a guess), then the low cost shale formations could be brought on line. It is of course true that investors will be very shy of making capital allocations to shale with this experience we now have. However, with low cost and fast payout, I would expect that some new wells would be brought on line.
    Jan 18, 2016. 07:01 AM | Likes Like |Link to Comment
  • How America's Shale Revolution Has Reduced Geopolitical And Price Risk  [View article]
    I agree with the premise here. The fact that shale can be turned on and off almost as simply as turning a valve on the massive underground storage of shale oil means that oil will stay low for many, many years. Furthermore, consider that fracking has not even been applied globally. What will be the supply of shale oil from Europe, Africa, Asia and Australia. One can reasonably guess that these future supplies will be enormous. Whenever the price of oil rises by a few dollars shale oil valves will be opened and the price will fall again.
    Jan 17, 2016. 11:06 AM | 3 Likes Like |Link to Comment
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