Roubaix Capital’s Long Thesis for FTAI Aviation

HFA Padded
Jacob Wolinsky
Published on

The following is an excerpt of Hedge Fund Alpha’s interview with Roubaix Capital’s Chris Hillary from the Q1 2024 issue of Hidden Value Stocks.

Chris Hillary is CEO and portfolio manager at Denver-based Roubaix Capital, LLC, overseeing about $165 million in long/ short small- and mid-cap (SMID) funds. He began his career in New York, specializing in fixed income at Morgan Stanley before relocating to Denver, Colo., where he joined the international-equities team at Marsico Capital.

Before founding Roubaix Capital in 2015, Hillary spent 10 years as an analyst and portfolio manager at Independence Capital Asset Partners, where he focused on all-cap U.S. equities in a long/ short fund. He prefers SMID-cap stocks because he believes they offer superior alpha-generation opportunities.

“Smaller-company stocks are better for fundamental stock-picking, as they are more directly driven by the opportunities and risks to their growth and profitability due to their lack of diversification compared to more diversified large-cap companies,” Hillary explained in an interview with Hedge Fund Alpha.

Long Thesis for FTAI Aviation

Chris Hillary of Roubaix Capital highlighted FTAI Aviation (NASDAQ:FTAI), which has market capitalization of $5.7 billion. As of Feb. 29, FTAI was the firm’s largest long position.

Q: Please briefly outline your thesis for the company.

A: We closely follow certain industries that we believe have structural advantages for their participants. The aerospace supply chain is one such industry. In addition, we look to identify inflection points often accompanied by an “agent of change” when considering new investment ideas. We are experienced aerospace investors, and FTAI was on the cusp of going through two important changes.

First, Fortress Transportation & Infrastructure (FTAI) owned disparate infrastructure assets like crude terminals and an aerospace engine-leasing and products group. The combination meant there were few natural owners of the stock. Second, FTAI had an S-Corp structure further limiting investor interest.

Q: Please outline your bull thesis for the commercial aerospace industry.

A: The pandemic decimated global air traffic, forcing airlines to dramatically cut back on services and equipment to stay solvent. This, in turn, put tremendous pressure on the supply chain to reduce labor and product flow. As passenger traffic trends rebounded post-COVID, Boeing and Airbus (OTCMKTS: EADSY), along with their supply chains, struggled to meet the improving demand.

Q: Why this company over others within the same industry? What sets them apart?

A: FTAI Aviation has a unique set of assets to service the world’s largest engine platform, the CFM-56, which powers the older generation of the Airbus A320 and Boeing 737 family of aircraft. These narrowbody planes are the workhorses of the industry with approximately 6,500 B737s and 10,500 A320s flying today.

Subscribe to Hidden Value Stocks to read the full interview.

HFA Padded

Jacob Wolinsky is the founder of HedgeFundAlpha (formerly ValueWalk Premium), a popular value investing and hedge fund focused intelligence service. Prior to founding the company, Jacob worked as an equity analyst focused on small caps. Jacob lives with his wife and five kids in Passaic NJ. - Email: jacob(at) FD: I do not purchase any equities to avoid conflict of interest and any insider information. I only purchase broad-based ETFs and mutual funds.