The scarcity framework is the real contribution here, more than any individual trade. "When there is an enforced control point which prevents supply from expanding to meet demand, there is scarcity." That one sentence is a better investing education than most books. The engine aftermarket stacks three layers of scarcity on top of each other: the fleet is aging faster than production can replace it, the backlog won't clear until the 2030s, and certification requirements block new entrants from competing for the work. All three have to break simultaneously for the thesis to fail.
What makes this structurally different from the AI trade everyone is watching is that none of it depends on a narrative holding. The aging fleet is physics. The production bottleneck is industrial capacity. The certification barrier is regulation. A chatbot isn't going to overhaul a turbine engine. The scarcity here is the kind that technology can't dissolve, which is the opposite of the kind of scarcity most of the market is paying 94x sales for right now.
Hey Sam, good find here. I have a few quick questions:
1. This is a cyclical trade (reminds me of a 'Capital Returns' strategy), but I'm curious why you see this as a trade and not a multi-year investment? Perhaps the stocks are not 'value' as in very cheap, but it feels based on your analysis they could be good mid term holds.
2. As you are trading, is this a spot or leveraged trade?
I read that Berkshire’s second largest incremental add in most recent filing was Delta Airlines. If you’re right that the fleet is old and locked into the 2030s, that’s mildly bearish for Delta’s cost line but bullish for its revenue, but these names are the cleaner, higher-margin way to own the scarcity / Delta more cyclical / messier / more capital-intensive which is what WB historically avoided 🤔
The scarcity framework is the real contribution here, more than any individual trade. "When there is an enforced control point which prevents supply from expanding to meet demand, there is scarcity." That one sentence is a better investing education than most books. The engine aftermarket stacks three layers of scarcity on top of each other: the fleet is aging faster than production can replace it, the backlog won't clear until the 2030s, and certification requirements block new entrants from competing for the work. All three have to break simultaneously for the thesis to fail.
What makes this structurally different from the AI trade everyone is watching is that none of it depends on a narrative holding. The aging fleet is physics. The production bottleneck is industrial capacity. The certification barrier is regulation. A chatbot isn't going to overhaul a turbine engine. The scarcity here is the kind that technology can't dissolve, which is the opposite of the kind of scarcity most of the market is paying 94x sales for right now.
Hey Sam, good find here. I have a few quick questions:
1. This is a cyclical trade (reminds me of a 'Capital Returns' strategy), but I'm curious why you see this as a trade and not a multi-year investment? Perhaps the stocks are not 'value' as in very cheap, but it feels based on your analysis they could be good mid term holds.
2. As you are trading, is this a spot or leveraged trade?
Thanks!
Or you can own FTAI and get their AI turbine business for free
Your article is about 3 times longer than it needs to be. Get to the point sooner.
I don't buy your thesis. Once the Great Depression hits, people will not be flying.
Your thesis is just another invest in tech pitch.
I read that Berkshire’s second largest incremental add in most recent filing was Delta Airlines. If you’re right that the fleet is old and locked into the 2030s, that’s mildly bearish for Delta’s cost line but bullish for its revenue, but these names are the cleaner, higher-margin way to own the scarcity / Delta more cyclical / messier / more capital-intensive which is what WB historically avoided 🤔