Is now a good time to own big assets such as airplanes, like Air Lease(AL - Get Report) does?
I would say "yes." If you look at the average age of the world's airplanes, you will figure out very quickly that they will reach the end of their usable life soon and that a significant number of aircraft will need to be replaced in the next 10 years. Then if you go and calculate how much equity is necessary to purchase those aircraft, you will see it's a multiple of the equity of the global airline industry. That means a company like Air Lease has an opportunity to lease these new aircraft and earn very attractive returns. Their pretax returns could exceed 20%, and they have seasoned management. These are the people who built up
International Lease Finance Corp.
, which was the largest aircraft lessor in the world. They have wonderful relationships with
Over the past few months, we've actually seen a decrease in the prices of some metals. Why do you want to own Globe Specialty Metals(GSM - Get Report) in this environment?
Globe is the world's low-cost producer of silicon metal. They have their own mines. They have their own low-cost power and the demand for silicon metals has been really growing. They provide the silicon that goes into personal hair products like shampoo and it's been difficult to satisfy the demand. And, at the same time, the competition is seeing higher and higher costs as their energy prices have escalated. Globe's energy costs, however, have been protected by their long-term contracts.
-- Reported by Gregg Greenberg in New York.
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