Flying High on Aircraft Financing
Cramer often sounds like a broken record when he talks about the importance of doing homework. He’s said that listening to a company’s quarterly conference call is the single best source of information out there, and yet it’s one thing a lot of investors neglect to do.
Well, today he’s got a prime example of why it’s so crucial to listen in on these calls. Sometimes you get a gem that you just would not know about otherwise, and that happened on AIG’s latest conference call, Cramer says, when it explained what drove the company up this past quarter. It was its aircraft financing business – that is, the business of leasing planes airlines all over the world. The sector is tearing it up, Cramer says, and you probably wouldn’t know it unless you were listening to the AIG call.
Before Cramer gets to his number one aircraft leasing play, he wants to shed some light on the business, because most people don’t seem to be paying attention to it. He thinks it’s a good place to be because, for one, the global airline business is recovering big time and that means airlines are placing a lot of new aircraft orders. Boeing can only make so many new planes and Airbus is a mess, he says. There’s a ton of demand and not a lot of supply, so companies in the market of leasing aircraft are in an enviable spot.
With the industry taking off, there’s one player in particular that is Cramer’s stock of choice – Genesis Lease , a company that came public last December. It’s small, owning only 41 planes, but it’s 100% levered to aircraft finance.
GE (the parent company of CNBC) owns 11% of Genesis. When it started out, the company essentially cherry-picked its fleet from GE, choosing the planes that were the most modern and fuel efficient – and everyone knows that all the airlines and their mother want planes that use less fuel, putting Genesis right in the sweet spot. It also has a relatively young fleet and is a true ROW, or rest-of-world, play with 82% of its aircraft based outside North America, Cramer says. In addition, Genesis happens to be a cash flow machine, paying out a 47 cent quarterly dividend, which puts its yield at 6.9%. If you want a stock for income, Cramer thinks this one is for you.
Bottom Line: Cramer likes Genesis Lease as a great way to play the strength of the airline business while keeping the actual airline stocks at arm’s length – and it’s in a hot sector. We know because AIG told us so.
Jim's charitable trust owns AIG. General Electric is the parent company of CNBC.
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