Is AerCap Holdings N.V. (AER) a Smart Long-term Buy?

Horos Asset Management recently released its Q3 2020 Investor Letter, a copy of which you can download here. Horos Value Internacional has not been immune to this dichotomy of performance, posting a -4.7% return in the quarter, compared to 3.6% of benchmark index. On the other hand, Horos Value Iberia returned -0.8%, outperforming the -6.3% of its benchmark index. You should check out Horos Asset Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.

In the Q3 2020 Investor Letter, Horos Asset Management highlighted a few stocks and AerCap Holdings N.V. (NYSE:AER) is one of them. AerCap Holdings N.V. (NYSE:AER) is the world’s largest aircraft leasing company. Year-to-date, AerCap Holdings N.V. (NYSE:AER) stock lost 25% and on December 30th it had a closing price of $46.10. Here is what Horos Asset Management said:

“Finally, we slightly reduced our position in the aircraft leasing company AerCap, as it became clear that the situation in the airline industry will remain extremely weak for some time. We have no doubts about AerCap’s solvency, as the company has continued to issue debt at a similar cost to that before the pandemic and is also taking advantage of the discounts on its debt outstanding to make early redemptions. However, we do believe that its ability to negotiate with the airlines is not the same, given that in the current environment it is the airlines that set the tone. As they say, if you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.

A recent example of this can be found in the bankruptcy process of the airline Aeroméxico. The Mexican company has managed to renegotiate with all the entities that lease it aircrafts, modifying the conditions of the contracts in order to adapt the lease payments to the effective flight hours, instead of paying a fixed monthly amount. AerCap and the rest of the lessors would not accept this type of change in a “normal” market. Similarly, AerCap and the rest of the players have been granting delays in lease payments to the airlines, in order to give them some breathing room, usually in exchange for increasing the duration of the contracts and charging future interest on this delay. The goal is twofold. On the one hand, to avoid putting too much financial pressure on their clients, since in this very tough market they could go bankrupt. And on the other hand, to try to minimize the negative impact on the expected return of those leases. Therefore, a very challenging environment (as we kind of expected), in which the upside potential for this excellent company has been significantly hit.”

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Aerovista Luchtfotografie/

In June 2020, we published an article revealing Horos Asset Management’s bullish investment thesis on AerCap Holdings N.V. (NYSE:AER) stock in its Q1 2020 investor letter. This suggests that the investment firm has been bullish for a long time on AerCap Holdings N.V. (NYSE:AER).

In Q3 2020, the number of bullish hedge fund positions on AerCap Holdings N.V. (NYSE:AER) stock increased by about 27% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in AerCap’s growth potential. Our calculations showed that AerCap Holdings N.V. (NYSE:AER) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.