On Friday, I unveiled the second tranche of my 2021 Tax-Loss Selling Recovery Portfolio -- four names that had a rough time in 2020, but could recover in 2021. Today, I roll out the final four.
AerCap Holdings N.V. (AER) , a Dublin, Ireland based aircraft leasing company, is down 30% year-to-date. The company was profitable during the first half of 2020, but had a rough, pandemic-influenced third quarter, and lost $650 million. However, earnings are expected to rebound this quarter. The next two years consensus estimates call for earnings per share of $5.56 and $6.35, implying forward price earnings ratios of 8 and 7. This is a company, not surprisingly with a lot of debt - $31 billion as of the end of last quarter. But that's what it takes to finance a considerable portfolio of assets, namely more than 1350 aircraft (as of 7/29/2020). AER currently trades at .7x tangible book value.
G-III Apparel Group (GIII) is down 30% year-to-date, and yes, it is another retailer. The company, like many others, is coming off of a couple of consecutive money-losing quarters. However, it seems none the worse for wear. GIII levered up in the first quarter, raising long-term debt $400 million to $900 million, but paid that debt down to $405 million last quarter. The company ended that quarter with $253 million in cash. GIII is currently trading at 11x and 10x 2022 and 2023 consensus estimates (January fiscal year ends). It is expected to be modestly profitable this year despite the two rough quarters.
Further adding to my collection of retailers is Sally Beauty Holdings (SBH) , down 32% year-to date. Interestingly, the company has had just one red quarter during the pandemic. One of the largest U.S. distributors of beauty supplies, SBH has more than 5000 stores in the U.S., Europe, and Mexico. Another company that added debt during the pandemic, the company paid back $445 million last quarter, ending with about $1.8 billion. SBH ended the quarter with $514 million in cash. The company trades at 7x and 6x the next two years consensus earnings estimates.
Rounding out this tranche, and the 12 names in the portfolio, is Phillips 66 Partners LP (PSXP) , a subsidiary of Phillips 66 (PSX) , down 48% year-to-date. PSXP is in the oil and gas transportation business, not a great place to be in 2020. It currently yields 12.1%, and trades at 8x and 7x 2021 and 2022 consensus estimates, respectively. Buyer beware, this an LP, which means that it is taxed differently than your average common stock.
There you have it, the 2021 Tax-Loss Selling Recovery Portfolio, which consists of:
Walgreen Boots Alliance (WBA)
Pilgrim's Pride (PPX)
Designer Brands (DBI)
Wells Fargo (WFC)
Townsquare Media (TSQ)
Falcon Minerals (FLMN)
AerCap Holdings (AER)
G-III Apparel (GIII)
Sally Beauty Holdings (SBH)
Phillips 66 Partners LP (PSXP)