Asymmetric Bets
Hedge Fund Analyst, Private Company CFO, Idiosyncratic Stocks & Accelerating Fundamentals
Howmet Aerospace is an obvious short because its valuation is insane for a cyclical industrial. Its oligopoly in turbine blades, where only three companies can produce at scale, is already well known and priced in at about 100x free cash flow. Even a bull case implies only a 2.7% free cash flow yield on 2030 numbers, far less attractive than Microsoft, Meta, Nvidia or Salesforce. x.com x.comÂ
Doncasters' earnings look relatively certain over the next three years, making the stock look quite cheap. Aerospace jitters center on JBLU and Elon Musk entering the blades and vanes market, but SpaceX might supply only its own needs and has no chance of external sales until 2031 or later. x.comÂ
GE Aerospace's premium valuation looks hard to justify as margin expansion slips to 2028. Services are guided to low-double-digit growth with flat margins in 2027, while faster-growing original equipment could keep overall margins flat. Roughly 10-12% revenue growth would imply about $1.2-1.3B operating profit growth, down from about $1.9B in 2026, against a 35-38x multiple. Q3 departures rose only 1%, with prolonged Brent above $100 a further near-term risk. x.comÂ
Howmet Aerospace's gas-turbine business is accelerating, but the market still prices it as one business on one multiple. Aerospace grew 12% in 2025, while industrial gas turbines grew 25% and 32% in Q4, and management sees that business rising from about $1B to over $2B in 3-5 years. Unlike GE Vernova and ATI, whose stories are absorbed, this is not yet fully visible. The May 7 Q1 report will show whether the turbine growth holds. x.comÂ
Honeywell Aerospace has always been a weak business, with a worse mix than better aerospace names such as HEI, TransDigm, Howmet and GE. With so many good aerospace businesses available, there is little reason to own it. @pitandhummus agrees that, underwritten standalone after the spin-off, it looked overstated relative to much better businesses like GE. x.com x.comÂ
Curtiss-Wright, an aerospace, defense and commercial nuclear supplier, is expensive against its earnings. At $545.79 it trades at 38 times earnings and 32 times next year's, versus the roughly 24 times aerospace and defense suppliers usually get. Fair value is $361.97 to $460.69, 24 times next year's $17.14 per share give or take 12%, putting the stock 18% above the high end; it is expensive above $582.72. This is a valuation-only view based on reported earnings and estimates. x.comÂ
This ten-stock portfolio trades at just 3.7x cash flow, so multiple expansion is a major opportunity rather than a risk. Portfolios at 37x cash flow face multiple compression, as Akre Capital's Q1 2026 letter shows: its price to next-twelve-month free cash flow fell from 37x to 19x without any deterioration in operating fundamentals. x.comÂ
GE Aerospace earns most of its money servicing a huge installed engine base, and record air traffic keeps that base turning. Engines sell at up to 70% off, while shop visits bring up to 70% of lifetime revenue; services were about 70% of 2025's $42B revenue, with a $210B backlog. At 43x earnings versus a 37x five-year average it is not cheap, a premium backed by the end of the conglomerate discount, margins and visibility. A correction would come only with a normal general market pullback. x.com … Show more
Microsoft is expensive on cash flow even though its 19-22x forward P/E looks like a 40% discount to its 10-year average. Its 2.0% forward free-cash-flow yield sits below the 3.3% 10-year median, and at this point in the cycle earnings multiples mislead while free cash flow is what the market actually prices. x.comÂ
HEICO is a rare compounder because owner-managers with a decentralized culture keep growing niche, FAA-approved aerospace parts. The Mendelson family owns about 20%, and the stock has compounded about 22% a year since 1990. Q2 revenue rose 25% to $1.38B and EPS 49% to $1.66, both beating estimates. Planes fly 30+ years and need parts throughout, in an aerospace market projected to grow from $330B in 2023 to $662B by 2033. The stock is always expensive; low $40s would be a lucky entry. x.com … Show more
AeroVironment is expensive against its earnings at 45x, versus the 24x aerospace and defense suppliers usually get. Fair value sits at $93.02 to $118.39, or 24x next year's $4.40 EPS give or take 12%, leaving the $196.02 price 66% above the high end, and even that leans on forward earnings 47% above trailing. The call rests on valuation levels from reported earnings and estimates only, not fundamental work. x.comÂ
