A Bank and Airline Stock That I Own

Raskolnikov

Since you guys love investing in airlines and banks, maybe I can suggest two stocks that I think will do well, without the massive risks that AIB/Aer Lingus have.

New York Bancorp - NYB

NYB are probably one of the strongest and best run banks in all of the United States. During the financial crisis, while many of their rivals went bankrupt, NYB were almost uniquely one of few banks that actually made money. Not only that, but when Uncle Sam came offering TARP money, they were in such a decent position that they were able to turn him away. Despite this, the share price has plummeted, although it has recovered slightly in the last few weeks.

When you look at the financials for NYB, you can clearly see why I think they're so sexy. An average return of equity of around 10% over the last few years with the same for book value, a 7.5% dividend and a trend towards increasing earnings per share are numbers that almost no other bank in America can even dream of. At the rate they are growing and the attractive yield, I can easily see NYB trading at twice the current price in 2-3 years time. Until then, you can enjoy your dividend and sleep easy.

Risks

• NYB are currently taking over a bankrupted bank. While they're buying it at a great price and will have even greater market share in the future; in the short term, the acquisition might take time to digest.
• Again, in the short term the dividend may not be sustainable at current levels.
• A double dip recession will obviously make things more difficult.

Avantair - AAIR

First of all, let me be clear here. Even at the best of times, almost any investment in the airline industry is putting yourself at risk. In a recession, this becomes an even more serious issue. If you're going to invest in an airline, you make it a very small part of your portfolio. With that said...

Avantair are a microcap company that operate a fractional jet ownership business. On the face of it, this looks like a horrible, horrible business to be in for a number of reasons...

• Only rich people can afford a share in a jet - with the recession, there are a whole lot less rich people around.
• Avantair competes directly with NetJets - a Berkshire Hathaway subsidiary. So not only are you competing with Warren Buffet, you're competing with the manager who is tipped to take over from Buffett (David Sokol). Gulp.

Up until recently, the numbers coming out from Avantair have been frankly poor. However, in the last quarter, they were able to actually come out with positive EBITA and increased revenue (yes, they're actually growing revenue in the recession). This is highly significant, yet the share price has hardly moved to reflect this. With the economy improving and the economies of scale kicking in, more of the marginal revenue will start adding to the bottom line.

Positives

• The product is essentially decent and the business model is in the Ryanair mold (low maintence costs, non-unionised work force, cheapest product on the market, etc).
• Your list of fellow investors reads like a who's who of really smart value investors.
• We can clearly see the turnaround here with the positive EBITA during awful market conditions. Things are likely to continue getting better.
• In a normal market, the potential to earn tens of millions is very possible. If this happens, you could get 10x your money in a few years.

Disclaimer: I own both as part of a highly diversified portfolio.

dunkamania

Raskolnikov wrote: »

An average return of equity of around 10%

That sounds quite low

Raskolnikov

Fair point, the ROE is probably average (considering many banks are imploding). What I didn't probably stress enough is the safety of the stock. It's got an Equity to Capital ratio of 6% (this is very good for a bank), a loan book with an average LTV of 60%, tiny % of unperforming loans, etc.

Raskolnikov

AAIR up 60% since the original post nearly 7 months ago - Aer Lingus up about 10% in the same time period.

NYB up 19% (incl. dividends) - AIB down about 40% over the same period of time.

Not blowing my own trumpet here, merely trying to illustrate the point that no one on here seems to have any concept of a risk/reward ratio, or even trying to retrieve a return on their capital. The fact I have outperformed the favoured picks of this forum with greater profit and less risk is a shocking indictment of how the majority of people on this board do their research (most of you might as well be using the lunar cycles of the moon to choose your investments).

The point I'm trying to make is that if you do your work (I mean your own work, not reading other peoples), you can actually make some seriously sexy profits.

jank

Congrats, well done.

You took the risk and now get the reward.That is was all this is, buying risk!

Are you going to sell or are you looking at a long term investment in those stocks.

Bullish

Well played Raskolnikov, Very nice return

Just wanted to make the point that all US airline stocks have risen due to Oil falling. Their main costs are Fuel, With Oil (USO) looking like it is making a rebound at the moment are airlines still the place to be ?

Jim2007

Raskolnikov wrote: »

AAIR up 60% since the original post nearly 7 months ago - Aer Lingus up about 10% in the same time period.

NYB up 19% (incl. dividends) - AIB down about 40% over the same period of time.

Not blowing my own trumpet here, merely trying to illustrate the point that no one on here seems to have any concept of a risk/reward ratio, or even trying to retrieve a return on their capital. The fact I have outperformed the favoured picks of this forum with greater profit and less risk is a shocking indictment of how the majority of people on this board do their research (most of you might as well be using the lunar cycles of the moon to choose your investments).

The point I'm trying to make is that if you do your work (I mean your own work, not reading other peoples), you can actually make some seriously sexy profits.

I fully agree on this. I'm new here, but see some of my other posts on the board.

Jim

dunkamania

Raskolnikov wrote: »

The fact I have outperformed the favoured picks of this forum with greater profit and less risk is a shocking indictment of how the majority of people on this board do their research.

Raskolnikov, I am curious, how do you measure risk?

Raskolnikov

dunkamania wrote: »

Raskolnikov, I am curious, how do you measure risk?

For a bank, the performance trend and level of leverage is critical. If a bank has €1 million of equity and €10 million of outstanding loans, then it only takes 10% of your outstanding loans to become impaired and you're bankrupt. This is why the trend of performance on your outstanding loans is key. When you see the level of impaired loans, real estate owned, etc. decline, then you be reasonably sure that this trend will continue. AIB is highly leveraged and has a loan portfolio that is still deteriorating. NYB is less levered, has a stronger loan portfolio which has been improving.

As for Avantair, that pick was easy. They actually grew their business and turned a profit in a recession without the market reacting. They only need to continue on that trend and the market would eventually start to recognise this. Avantair also basically acts as a free out of the money play on the economy. If the economy was to significantly pick up, Avantair being in a highly cyclical business would benefit most. You would certain get a return of many multiples on your investment then.

I guess the key lesson I've only recently learned is that the market doesn't always react quickly enough to fundamental changes in a business. Also, it's much, much easier to get superior returns from finding businesses with improving fundamentals rather than trying to identify turnarounds. Irish banks have been a terrible investment for over three years now, yet everyone is still completely besotted with them. As Buffett once said, "Turnarounds' rarely turn around".

pirelli

PNCL This was My airline pick It went up 100%. It's share price is dropping,i suspect after a quite poor quarterly for March 2010 compared to march 2009.

EPS was $0.09 compared to $1.05

CISCO looks good for a quick run up with Markets.

UpAgainToday

Raskolnikov wrote: »

AAIR up 60% since the original post nearly 7 months ago - Aer Lingus up about 10% in the same time period.

NYB up 19% (incl. dividends) - AIB down about 40% over the same period of time.

Not blowing my own trumpet here, merely trying to illustrate the point that no one on here seems to have any concept of a risk/reward ratio, or even trying to retrieve a return on their capital. The fact I have outperformed the favoured picks of this forum with greater profit and less risk is a shocking indictment of how the majority of people on this board do their research (most of you might as well be using the lunar cycles of the moon to choose your investments).

The point I'm trying to make is that if you do your work (I mean your own work, not reading other peoples), you can actually make some seriously sexy profits.

The problem on this site is the fact its DOT IE - as a result its all about AIB and BOI. Like a BOI thread has 100k + views thats a total joke

''Hey guys are the banks worth a punt on'' - gimme a break like id be surprised if 10% of the people perform any form of analysis apart from ''well it went down and now its going back up so id better buy it''

Listen to Rask since Rask has good patience in explaining

Bullish

(head)up(arse)againtoday.

Although i agree with some of your comments. I have yet to see you contribute anything to the forum in a positive manner.
I suppose the term would be called a troll
You dig up old treads and post a disagreement or belittle the posters on it.

Try contributing Or STFU

UpAgainToday

Bullish wrote: »

(head)up(arse)againtoday.

Although i agree with some of your comments. I have yet to see you contribute anything to the forum in a positive manner.
I suppose the term would be called a troll
You dig up old treads and post a disagreement or belittle the posters on it.

Try contributing Or STFU

Disclaimer : Btw this isnt an attack on anyone I am simply replying to a post and not aiming it at an individual

Yeah I actually agree with you - I have only gone around leaving posts telling people why I personally believe their idea/advice is wrong in my opinion - surely saving someone money is just as important as helping someone earn money if not more important in trading? Like im not Irish so maybe ye have a different culture or something but I dont see the problem - I will agree with a poster and offer any additional information I deem beneficial when I find a post I agree with - you dont buy a random share for the sake of buying it so why agree with someone for the sake of doing it?

Bullish

Maybe its just a cultural thing then .... You sure sound like a paddy
Nice to have you on the board... try toning the criticism down a little and focus on your positive contribution
Just like getting a woman into bed , gentle steering works better than a Baton over the head
Good luck

UpAgainToday

Bullish wrote: »

Maby its just a cultural thing then .... You shure sound like a paddy

Well I guess I kind of am irish since my grandparents parents were a quarter irish so I guess I kind of am

UpAgainToday

Bullish wrote: »

Maybe its just a cultural thing then .... You sure sound like a paddy
Nice to have you on the board... try toning the criticism down a little and focus on your positive contribution
Just like getting a woman into bed , gentle steering works better than a Baton over the head
Good luck

Oh I decide when a woman gets into bed with me - the trader way :P

Bullish

A win is a win I guess

turbobaby

UpAgainToday wrote: »

Oh I decide when a woman gets into bed with me - the trader way :P

Rape is illegal in Ireland... Great picks though. looking forward to reading about your next ones!

Bullish

Goodbodys and any other irish broker has been raping people for ages with their commissions and nothing is done about it.

Raskolnikov

Forgot about this.

Avantair up 20% since posting.
New York Bancorp up 25% after dividends.

I sold Avantair awhile back, but just sold NYB yesterday. Both are still good investments, but there is other cheaper stuff out there.