AerCap Holdings Has Strong Financial Position
Billionaire Leon Cooperman (Trades, Portfolio)'s Omega Advisors has disclosed an equity portfolio valued at $6.27 billion as of the end of the second quarter of 2015. The equity portfolio is mainly invested in consumer discretionary (22%), finance (21%) and tech (11%) stocks.
In this article, we will look into one of Cooperman's top three picks: AerCap Holdings N.V. (AER). The fund upped the stake by 43.41% to 5.78 million shares, valued at $264.81 million as of the end of the second quarter.
This Netherlands-based company leases aircraft to airlines around the world and has greatly expanded its presence following its acquisition of International Lease Finance Corp on May 14, 2014, when it completed the acquisition for a total of $7.6 billion in cash and stock. The company has assets of more than $40 billion and a fleet of 1,300 aircraft, with an order for 400 more. AerCap will also assume about $21 billion in net debt from ILFC. As of December 2014, it had $30.4 billion of debt, representing a debt-to-equity ratio around 3.8, which is lower than the 4 to 5 range it targets across the business cycle.
One important aspect is its strong liquidity position necessary to finance the delivery of new aircraft. As of the second quarter of 2015, it had $1.6 billion in cash and $5 billion in undrawn credit facility. Also, it targets operating cash flow of $3.4 billion for the next 12 months. So, it would total $10 billion in that time frame. This make me feel comfortable because the firm can service its debt without problems.
In terms of valuation, the stock sells at a trailing P/E of 7.01x, trading at a discount compared to an average of 16.4x for the industry and it is close to a 3-year low. To use another metric, its price-to-book ratio of 1.05x indicates a discount versus the industry average of 1.16x, while the price-to-sales ratio of 1.67x is above the industry median of 1.06x.
The stock price has an upward trend in the five-year period. If you had invested $10,000 five years ago, today you could have $37,784, which represents a 30.5% compound annual growth rate.
The stock surged 5.2% in a year-to-date basis, but declined 16.83% in the past 12 months. Despite this, hedge funds were bullish in their latest filings. Four funds entered a new position in the stock and another four funds increased their previous positions. Jim Simons (Trades, Portfolio), Steven Cohen (Trades, Portfolio), George Soros (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) initiated new positions. Among the ones that increased their positions were Louis Moore Bacon (Trades, Portfolio), Eric Mindich (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Jana Partners (Trades, Portfolio).
Disclosure: As of this writing, Omar Venerio did not hold a position in any of the aforementioned stocks
This article first appeared on GuruFocus.
