Fly Leasing Still Offers Upside On Air Travel Demand Recovery

Not all undervalued stocks are the same, and determining how much of a stock’s apparent undervaluation is due to sentiment, temporary headwinds, and longer-term structural/competitive issues are a big part of generating above-average long-term investment returns.

That brings me to Fly Leasing (NYSE:FLY), an aircraft leasing company that combines all of the above issues into one somewhat challenging situation to evaluate.

I do absolutely believe there is a “cheap for a reason” aspect to Fly Leasing, including a lower-quality customer base (reflected in weaker rent collection), less capital flexibility, a less advantageous corporate structure, and more limited growth options. On the other hand, I do also see a great deal of skepticism built into the share price ahead of what should be an emerging recovery in domestic/short-haul flights.

I don’t exactly like Fly Leasing, and I remain content to own AerCap (NYSE:AER) in my own portfolio, but I do believe that FLY should trade closer to the mid-teens than the low teens, and as vaccinations progress around the world and air travel recovers (starting later in 2021 and into 2022), I do believe the numbers and sentiment will improve.

 

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Fly Leasing Still Offers Upside On Air Travel Demand Recovery