A VaLUE Investing RECAP: Beta technologies (BETA)
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Our Latest PodCast: unsettling times Yield fresh value in Fundamentals
Today’s distractions might just be best managed by sticking with the strict mise en place of owning valuable things over time.
How do we know value matters? We examined the value gained or lost in the ideas we’ve studied over the past few years.
What did we learn? It’s not easy to find, but truly valuable things get more valuable.
Case in point was our exploration into the reported decline in airline safety. Flying turned out to be safer than ever. But the planes doing that flying, particularly in North America, will age. Newer aircraft will be sold to Asia and India.
Therefore, the companies that repair and upgrade aging American planes will thrive.
Not surprisingly, Costa Mesa, CA-based Ducommun (DC0) outperformed equity indexes by an amount so large, comparisons are silly.
Marking to Market: Since pricey “Logistics Security Complexes,” that’s the geek-speak for military protection of shipping and trucking, drove up the cost of parts and fuel, company value has eroded since May. But demand for aviation parts won't fade anytime soon.
Ducommun might actually still be cheap.
Sometimes the right things become valuable: Ducommun rode the shortage of airline parts to new highs.
What else did we learn? Some value-oriented ideas do stray outside their flight envelopes.
Earlier this year, we examined the dramatic efficiencies in using batteries to fly planes.
Regional eAviation maker, Archer Aviation (ACHR), emerged as the leader, when it gained operational control over a Los Angeles basin airport.
But cash burn rates and technical trading cratered company value by more than 70%. Mayday! Mayday!
Marking to Market: We absolutely could have done a better job of understanding the active short trading on this sector. But the value the company creates still grows.
The FAA granted Archer equipment full means-of-compliance.
Several new defense contracts flowed in.
United Airlines announced new routes.
Bonus Bit of Value: Strictly speaking, the fundamentals are so solid that other similar eAviation companies make sense. In particular, South Burlington, VT-based Beta Technologies (BETA). It makes a fixed-wing version of the similar technology.
It’s stock a shade less volatile. Meaning, owning all the companies in this market could be a hedge.
Archer lost about three-quarters of its value and could not manage coordinated short trading. But the basic argument still flies.
Other “value”-able lessons: In all due respect to AI, electricity is getting to be a pretty darn smart idea.
We took an honest look at what’s needed for machines to pretend to think. We found that the production and distribution of electricity will hold value, no matter what. And with not nearly the risk of AI.
Spanish utility, Iberdrola (IBE), jumped out as a clear winner.
We liked its diversified assets, access to American power market, and its global footprint.
Marking to Market: What a blessing it has been to own some machine learning upside, while still being able to sleep at night.
Spanish utility Iberdrola shows the value of being agnostic about how to generate power and serving different markets around the world.
Finally, what value teaches the “tech bros”: Turning houses into hotels ain’t a thing.
Way back in 2021, we pointed out the fading fundamentals of Web travel giant Airbnb.
It took awhile, but starting in 2022, high platform costs, hostile relationships with property owners, and regulatory complexity began dragging down performance.
By 2026, Airbnb trades at the same $150 it was trading at in 2021.
Marking to Market: If you compare Airbnb to a base index, like the NASDAQ composite, this operation has been eating value for at least the last 18 months.
Web or no web, Airbnb has become just another troubled, margin-squeezed Internet company struggling to find margins.
The Sum of Our Hindsight Intelligence: No one — especially us — is claiming finding value in these hectic times is easy. You will note, we have published far less over the past 6 months than ever before.
Trust us, sensing out value is rewarding, and ever more challenging.
Still, value is there if you invest in finding it.
Finding value isn’t easy, especially these days. But considering the alternative, why not bet on a better tomorrow?