Re: AER
I am simply suggesting that when a state-backed player gets involved who is looking to build a presence in a sector, that economics may be disregarded for prestige.
I don't really agree with your other points - business may well be good, but I don't see that as the mark of a value investment. Sure, the market seems good right now, but with average life of aircraft falling and with huge backlogs, the business needs robust economic growth to survive, and I don't think that is something that can either be counted upon, nor should be relied upon if there is to be any margin of safety.
I would rather be in a stock in a sector that nobody else likes, as the risk is that with this stock and this sector in particular that we are simply generating a bubble.
There is enough research out there to suggest that aircraft leasing is in a bubble for me to have no faith that I would gain a reasonable return on my investment.
Frankly, it generates a pretty average return on assets, and the only thing stopping a new player emerging is finance, which is rarely in short supply when Boeing are prepared to finance their own deliveries.
I view this as analogous to the shipping world - taking away the 2006-2008 bubble, values today are still too high, and backlogs are too large.
I'm not suggesting there will be an eventual crash, but the sector economics are simply hair-raising for my comfort. |
