AerCap (AER) has been one of the top contributors to Greenlight Capital’s (GLRE) performance YTD. As of May 6, AerCap’s stock has returned 30%, outperforming the S&P 500 (SPY) and the Dow Jones Industrial Average Index (DIA), which have returned 17.2% and 13.3%, respectively, in the same period. Interestingly, this stock was one of the biggest detractors for GLRE in Q4 2018.
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When discussing his advice to go long on AerCap during the Sohn conference, Einhorn noted the backlog in airplane orders. He said, “If you want a new plane delivered anytime soon, you need to go to a leasing company that has a spot in lone on the order book.”
Einhorn also expects AerCap to continue to repurchase shares to drive earnings growth. During its Q4 2018 earnings call, Einhorn elaborated on his long bet on AerCap. He mentioned that AerCap’s business is stable with 99% of its lead on lease to a diversified group of airlines. He also believes that AerCap’s future earnings stream offers very good visibility, as there is a 7.4-year remaining average lease term.
Go short GATX
GATX (GATX) stock has increased by 9.3% year-to-date as of May 6. The company released its Q1 2018 results recently. Its Q1 profit fell 46% YoY to $41.5 million, which was despite the full deployment of its rail assets during the quarter. Einhorn believes that GATX stock could be overvalued. He also prefers air travel to rail as he thinks rail is more tied to economic cycles.