Crisis Portfolio: Aena, Airbus, REE at 11x P/E, 100% Cash

Aena, Airbus and REE at 11x P/E: the crisis shopping list

No one knows when normality returns, but they do know the price of waiting. The thesis for this crisis portfolio is simple and brutal: a handful of companies are monopolies or quasi-monopolies with balances capable of withstanding over twelve months without revenue, and which have corrected between 20% and 63% since February 21. At these prices, the drop is not the risk; it is the argument.

The starting point is unusual: 100% liquidity and a list divided into a stable core, geographic alternatives for each position, and a separate drawer for opportunistic purchases reserved for crash prices — P/E below 5 or price-to-book below 0.5, depending on the sector — provided there is no capital increase in sight. Opportunistic purchases, it is warned, may take months or years.

Aena, REE and Snam: regulated monopolies at bargain prices

Aena is first on the list. It had corrected from 167.6 euros marked on February 21 and traded at a P/E of 11. It has no competition of any kind in Spain and, with cash and unused credit lines, would withstand over twelve months without revenue before needing to raise capital. The risk is not in the business: it is in aviation taking years to recover 2019 levels, something the list’s author takes for granted for both Aena and Airbus.

Red Eléctrica has fallen 20%, less than others, and trades at a P/E of 11.8. The comparison is with Italian Terna, which trades at 15.5. The question is whether this difference compensates for the higher regulatory and political risk attributed to Spain; at equal P/E, the choice would be Italian. Something similar happens with Snam: three times larger than Enagás, present in several European countries, P/E 12 versus 10.5 for the Spanish. The argument is always the same, and it is not financial: less political noise.

Airbus, ACS and Inditex: quality that took the hit

Airbus forms a duopoly with Boeing, it is recalled, which has cost the Chinese decades to try to break. It had 9.3 billion in liquidity against 10.15 billion in total debt, started from 130 euros and traded at P/E 11, although the drop in orders could lead results to negative territory in 2020 and 2021. ACS has accumulated a 45% drop — it reached a 63% decline — with nearly 10 billion in cash, 10.5 billion in debt and free cash flow exceeding 3,000. There are no barriers to entry in the sector, and that is paid for.

Inditex deserves special mention. Its cash level is described as brutal and the probability of a capital increase is very low. The logic is almost a dark joke: if Inditex had to raise capital, the portfolio would be the least of the worries. As an alternative in textiles, a British luxury firm appears with an impeccable balance sheet and a P/E around 15, although overlapping Inditex, this firm and Dior is considered too much for a single sector.

Macy's, REITs and the American retail apocalypse

Interest in US shopping centers hits a fundamental problem. Specialized REITs have been falling since 2016 due to the physical retail crisis and have high debt and little cash, a profile unappealing for a long-term portfolio. Macy's, meanwhile, traded below 4 dollars and negotiated raising up to 5,000 million in debt: 3,000 with inventory as collateral and between 1,000 and 2,000 with real estate.

The optimistic reading is that, if financed without capital increase and at reasonable interest rates, there is room to sell part of its real estate assets in two or three years and pay off the debt. The pessimistic view passes through the Manhattan shopping center or large luxury assets, considered difficult to replicate. For European office REITs, the doubt is identical, with no clear target price.

Amazon at 140x P/E: investment or faith in the story?

The most frontal clash comes with US technology. One side argues that Amazon has multiplied its value fivefold in five years, that its sales exceed expectations year after year, and that seeing a trillion in revenue in a decade is not unthinkable. The other responds with a threshold: P/E above 30 is expensive, and 140 is not touched even with a stick. The comparison with Tesla, Square, Uber or Beyond Meat is explicit, and the reference to pyramid schemes is also there.

The counterargument does not deny the business: it denies the price. And adds a factor of the era. It is the first crisis in which one can buy a stock from a mobile phone practically at zero cost, which spikes the most popular quotes. When that money leaves as fast as it entered, the trajectory may be that of companies that stopped growing at the rate the market took for granted.

Russia, China and the problem of owning nothing

Russian shares appear as an alternative due to scandalous ratios — banks and ports with crash multiples — but with a large warning about the volatility of the ruble, capable of wiping out 30% or 40% of the portfolio’s value on its own. In China, the problem is another and deeper: buying certain tech giants is not equivalent to owning the company, but to an intermediate structure with no voice or vote on the business, and with ultimate ownership in the hands of the State.

The closing: what can go wrong

With these threads, the base scenario is that several of these companies return to March lows or lose them, and that purchases are staggered over months. The most likely prediction is boring: most positions will open lower and some, like Airbus, will not give the opportunity until the drop is vertical. What does not hold is the haste to enter everything. Better to lose an opportunity cost than to enter badly.