Horos Asset Management, an investment management firm, published its first quarter 2023 investor letter. A copy of the same can be downloaded here. During the quarter, Horos Value Internacional fund returned 6.0% in the volatile market environment compared to a 5.4% rise in its benchmark index and Horos Value Iberia was up 6.1% in the same period, compared to a 10.8% rise of its benchmark. Since Horos’ inception on May 21, 2018, Horos Value Internacional returned 34.0%, compared to a 47.1% gain of its benchmark index, while Horos Value Iberia has returned 10.9%, slightly below its index’s 13.4% return. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Horos Asset Management highlighted stocks like AerCap Holdings N.V. (NYSE:AER) in the first quarter 2023 investor letter. Headquartered in Dublin, Ireland, AerCap Holdings N.V. (NYSE:AER) engages in the lease, financing, sale, and management of flight equipment. On June 9, 2023, AerCap Holdings N.V. (NYSE:AER) stock closed at $59.59 per share. One-month return of AerCap Holdings N.V. (NYSE:AER) was 6.11%, and its shares gained 33.55% of their value over the last 52 weeks. AerCap Holdings N.V. (NYSE:AER) has a market capitalization of $14.198 billion.
Horos Asset Management made the following comment about AerCap Holdings N.V. (NYSE:AER) in its first quarter 2023 investor letter:
“To explain the merits of our investments in the financial sector, I would like to end with a quick review of the difference between the management of their businesses, compared to the two risks we have just discussed, i.e., maturity mismatch and (excessive) financial leverage of traditional banking (obviously, moral hazard has no place here, as the privileges of banking do not apply to these companies). Specifically, I am going to focus on the purest cases of financial intermediation in which we are invested: AerCap Holdings N.V. (NYSE:AER), ALD Automotive, Sun Hung Kai & Co and S&U.
Let us start with maturity mismatch, which is the first of the structural problems in banking. We own a stake in AerCap and ALD Automotive, two companies with very similar businesses in their essence. In short, these entities borrow money to acquire assets (aircraft and automobiles, respectively), lease them for a period of time (on average, seven and four years) and sell them at the end of their contract (in the case of AerCap, the longer useful life of its aircraft means that the contracts are usually renewed at maturity). If these companies were to operate like a bank, they would borrow at very short maturities and would have to continually roll over that financing to avoid falling into an unsustainable liquidity risk, should they have to repay their debt (their assets are leased). However, as we have already seen, operating with such a maturity mismatch would be a recipe for failure. In fact, Guinness Peat Aviation, the company that pioneered the aircraft leasing business in the 1970s and 1980s, ended up going bankrupt (among others), for over-reliance on short-term financing.32 A lesson never to be forgotten by Aengus Kelly, CEO of AerCap and the person who inherited the unloved assets of Guinness Peat Aviation after its sale to GECAS in 1996 (by a twist of fate, Kelly eventually acquired GECAS two years ago)…” (Click here to read the full text)
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AerCap Holdings N.V. (NYSE:AER) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held AerCap Holdings N.V. (NYSE:AER) at the end of first quarter 2023 which was 32 in the previous quarter.
We discussed AerCap Holdings N.V. (NYSE:AER) in another article and shared Horos Asset Management’s views on the company. In addition, please check out our hedge fund investor letters Q1 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
