Busy Busy

I've been in London for more than two weeks now, almost forgetting about the blog. The market has been tremendously bullish yet apart from my EADS position (which I'll discuss below) I haven't traded at all. See, in late September I was approached by two firms at the same time, a decent-sized hedge fund and a privately-held equity investment company based in London. Some of the people behind the two firms I've known for years and that's how they "found" me. Basically, I was asked to take a seat on their advisory boards where I would take part in overall strategy and asset allocation decisions.

At first, I didn't know what to think. For almost two years I've thrived as an independant and enjoyed every second of it. I swore I would never get tangled up in corporate life again. Also, if I accepted their offer, what impact would it have on my own operations? A couple of days was spent thinking about it and then I signed on having flown to the City (must admit it was nice being back). Anyway, the pay package and the terms were lucrative and so I said yes.

On to EADS (Airbus is a subdivision of the company) - how about that for a start!? I bought @ 21.60 on 27-Sep and will be looking to add to my position on a meaningfull retracement. What are my arguments for buying a European aircraft maker ?

• The long trend of the market remains up
• The nature and tendency of the aviation industry is sound: basically, it's Boeing, Airbus and everybody else. Demand for commercial airliners is growing at a stellar clip and Airbus expects the demand toward 2025 to be worth an estimated $2.6T. The US remains the biggest market whereas China and India is growing rapidly in terms of available routes and passenger numbers.
• Trend of the selected company's affairs: this is the greatest unknown within the investment case. Certainly, most would argue that EADS is trending toward improvement after more than 18 months of awful performance in the stock price as well as the boardroom (usually, the two go together). The major X factor is the Airbus A380 - the mega jetliner that the company is pushing hard after numerous setbacks. I'm eyeing several key deals recently (like the one with British Airways, see earlier post) and more are bound to come at the expense of Boeing. This week, the latter announced 6 months delays to their newest airliner, the 787. Airbus paid dearly for late deliveries of the A380 and I'm confident Boeing will too in turn making the investment case for EADS that much better.

I'll leave it up to you to judge the management and the earnings potential of the company. Needless to say, I liked what I saw.

Have a nice weekend.