Editor’s note: As of 9/20/11 Lucas Krupinski no longer manages a Covestor model
Fly Leasing (NYSE: FLY) is a global lessor of modern, fuel-efficient commercial jet aircraft. The Company’s aircraft are leased under long-term to medium-term contracts to a diverse group of airlines throughout the world. The Company was formed to acquire, finance, lease and sell commercial jet aircraft and other aviation assets directly or indirectly through its subsidiaries.
Lucas Krupinski manages Covestor’s Small Cap Fundamentals model, which seeks to generate returns through a variety of methods including with preference for smaller cap issues. Krupinski recently added FLY to this model, so we asked him to share his reasons for the purchase. His response follows.
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As its name implies, Fly Leasing leases a fleet of aircraft. It trades at a relatively low multiple and with an attractive yield.
A quick read through the company’s 1st quarter 2011 financial results [PDF] yields many other interesting pieces of information. They acquired one additional jet, and entered into a joint venture that owns other four jets. I feel like their risk is managed, in that their fleet of 60 jets are leased to 34 separate leasees (lessening the single party risk) across 23 countries (lessening its geographic risk).
Furthermore they are a net repurchaser of their own shares, having bought back 24% of the shares they initially sold to the public. Should those repurchases be suspended or slowed, that will another form of cash flow that can either be reinvested into their business or paid out to shareholders.
Of course there are risks, which are outlined in the company’s 10-K. I do think that the risk/reward ratio on this is favorable.
Sources:
Pricing data, P/E and Dividend ratios from Yahoo Finance. http://finance.yahoo.com. All data current as of 5/26.
“Fly Leasing Reports First Quarter 2011 Financial Results” FLY Press Release. 5/4. http://www.flyleasing.com/layouts/54/uploads/files/9140.pdf
