Billionaire Steven Mandel Bought This Stock Recently

LONE PINE CAPITALLone Pine Capital filed a 13G with the SEC this week to report that it had acquired about 6 million shares of BE Aerospace Inc (NASDAQ:BEAV), giving the fund ownership of 5.7% of the company’s shares outstanding. BE Aerospace is a $4 billion market cap company which manufactures products for jet interiors- seat frames, oxygen storage and delivery systems, and even lavatory systems. The company also provides premium furnishings for business aircraft. At the end of June Lone Pine, managed by billionaire Tiger Cub Stephen Mandel and currently counting about $17 billion in assets under management, had reported a position of 4.5 million shares. Therefore, the fund added 1.5 million shares in about a month and half to bring it to 6 million by mid-August. Lone Pine had initiated its position in BE Aerospace earlier in 2012 (see more of Lone Pine’s stock picks) .

At the end of the second quarter other hedge funds were generally reducing their positions in the company. Columbus Circle Investors had decreased its position slightly to 1.7 million shares, and fellow billionaire Ken Griffin’s Citadel Investment Group cut its take 23% to about 900,000 shares. Another large hedge fund holder of the stock, Wayne Cooperman’s Cobalt Capital Management, held its stake constant at about 940,000 shares (find more stocks in Cobalt Capital Management’s portfolio).

BE Aerospace’s 10-Q for the second quarter of 2012 showed that the company had increased its revenue a remarkable 26% compared to the same period in 2011, and that net income had risen about 30% as it had been able to keep costs from outstripping revenue growth. Over the first half of the year, BE Aerospace revenue grew 25% and its earnings were up 33%. So the company’s growth appears to have been sustained over this period- both the first and second quarters well ahead of 2011. Growth in revenue and operating income occurred in all three of the company’s business segments: commercial aircraft, consumables management, and business jets. Revenue did only increase by 3% in the second quarter compared to the first quarter, however, suggesting that growth may be slowing.

The sell-side expects some slowdown in growth, but not much. At the moment BE Aerospace trades at 15 times trailing earnings, which given its recent growth rate would seem to make the stock quite reasonably priced. Analyst projections make it look very cheap: the forward P/E is 12 and going out over a longer time frame the five-year PEG ratio is 0.6. Perhaps the company’s earnings will not be quite as good as the Street expects, but given that it is trading at such a low multiple already we think that even moderate growth should easily justify the stock price. Concerns that the company is too exposed to the broader economy aren’t quite warranted either with a beta of 1.5: high, but not as high as an air travel-related company could be.

We would compare BE Aerospace to a number of other companies which produce aircraft components: Curtiss-Wright (NYSE:CW), HEICO (NYSE:HEI), and Triumph Group (NYSE:TGI). Curtiss-Wright manufactures precision components such as valves and pumps while the other two companies provide engine components and other parts. Triumph and Curtiss-Wright trade at close to 10 times earnings on both a trailing and forward basis, reflecting low growth expectations from Wall Street analysts, while HEICO is priced higher at a trailing P/E of 23 and a forward P/E of 19. Considering that more aircraft orders should mean more business for these companies as well as for BE Aerospace we’re not sure BE’s growth is going to be substantially higher, particularly as many of its products seem to be lower-tech than these other business’s offerings. We would also consider Embraer (NYSE:ERJ), a manufacturer of commercial and executive aircraft, as a peer. Embraer trades at 9 times forward earnings and a low five-year PEG ratio of 0.7. It grew its revenue, but lost ground on earnings, in its last quarter compared to the same period in 2011. It seems to have a growth trajectory more in line with BE Aerospace, and in this case we think we would pick the component manufacturer over the aircraft provider.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!