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Chevron Corporation Message Board

  • ronseth77 ronseth77 Oct 6, 2010 12:48 PM Flag

    Before you are overjoyed with the rising oil price

    Before you are overjoyed with the oil price hike, you should be aware that our nation is suffering. President Obama will remind you and the other voters by kindly imposing a special patriotic oil tax.

    Oil price will likely go higher because of the increasing demand and the limited supply. But oil stock may not be the best vehicle to take advantage of increasing oil price, because the governments will levy heavy tax on the profit of oil companies. Someone have to pay for the wars, the entitlements, and the rescue of the Wall Street. Not to mention Obama dislikes carbon emission.

    Companies of fuel efficient operations or products may take better advantages of the rising oil price. One such companies is AerCap, one of the world's leading aircraft leasing and trading companies. It owns about 200 large, new or young, fuel effecient civilian aircrafts. When oil price increases, AerCap's Boeing/Airbus planes will have higher leasing rate or selling price because of their fuel efficiency.

    AerCap leases or sells its assets to the highest bidders globally, and its customers are mostly from the economies that have recovered from the global recession and are now expanding. Anyone who have flown lately, particularly in oversea/international routes, are amazed how packed the airplanes are and how pricy the tickets have become. Airlines are entering an era of expansion, and they can only do so by buying Boeing or Airbus.

    New, fuel efficient commercial aircrafts are so desirable, anyone now wanting to buy a new aircraft from Boeing/Airbus directly would have to wait four years because of the long order backlogs. The perpetual delay of the Boeing 787 dreamliner has made the supply of new aircrafts even tighter. The only feasible option is to lease/buy from aircraft leasing companies.

    AerCap makes money in quite a few ways. It receive deep volume discount becuase it is a loyal and big customer of Boeing/Airbus; it gets favorable loans from the banks becuase of its excellent balance sheet; it gets good rates from the aircraft leases because it can give the customers flexible financing, also because it is one of the few sources of new, fuel efficient aircrafts thanks to the orders AerCap placed during the financial crisis.

    With forward p/e of 6.22, peg of 0.42, price/book of 0.83, AER(AerCap) is a far better stock than CVX, with or without the patriotic Obama oil tax.

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