Publicly Traded Airports: A Useful Benchmark?

by: Roger Nusbaum posted on: May 13, 2008 | about stocks: AEOPF.PK / EWO / EWQ / EWS / JAIRF.PK / MQRSF.PK / SPASF.PK    
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Here's a new sub-sector - well, new to me, anyway: publicly traded airports.

I have spent the last few days trying to learn a little about some of the publicly traded airports (many airports from foreign countries are publicly traded companies).

There are close to 20 of them, that I know of anyway. To be clear, I have just started looking at them, so I still have plenty to learn, but I think I might be noticing something with a few of them: They seem to have a low correlation to the benchmark index of the respective country of origin.

This is true of Aeroports de Paris (AEOPF.PK) versus iShares France (EWQ), sort of true with Singapore airport (SPASF.PK) and iShares Singapore (EWS), Vienna International Airport [Flughafen Wien, FLU.EAV] and iShares Austria (EWO), to name a few.

So what does this mean? That remains to be seen, I suppose, but where I think this is heading is tapping in to what is happening on the ground in a country without correlating to the stock market of that country, which at times could be the right position. This might tie into the idea I have had about indexing GDP growth from some countries into an ETF or ETN and using that as a proxy for a country or region.

As I say, I am still early on in the learning process, but I think there might be something here. Airports are part of the infrastructure theme, and my initial impression is that the businesses are not that complex compared to other segments. For now the only thing out there that comes close to an investment product is Macquarie Airports (MQRSF.PK) which, as I understand it, owns stakes in quite a few airports around the world.

This is either what I think (hope?) it will be, or it isn't. But doing the work to learn and then coming to a conclusion, whether it is right or not, is an example of something I have been talking about for a while: Coming to grips with the idea that equity returns in the future may not come from the areas we expect, so we need to learn about different areas.

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This article has 8 comments:

  •  
    User 192654
    May 13 02:07 PM
    SPASF is the symbol for Singapore Airport Terminal Services, or SATS, which provides ground handling and airline catering services at Singapore Changi Airport. Vienna and Aeroports de Paris own their respective airports. SATS is not an airport owner nor operator.
  •  
    JonD
    May 13 02:08 PM
    Roger, you should look at MGU --- public infrastructure CEF advised by Macquarie. unlike MIC, though, MGU only invests in public companies so no self-serving mark-to-model funny business.

    as of 3/31/08, MGU had 11.9% of its NAV in public airports. other interesting (non-correlated, alpha generating) infrastructure sectors include toll roads, pipelines, water utilities, etc. (all publicly traded).

    and pretty reasonable expense ratio for a levered actively managed CEF (the MER on etfconnect.com is wrong, btw).

    lots of international diversification, too, and just for you and your clients and readers, it's on sale right now at a 6.0% discount to its NAV.
  •  
    JonD
    May 13 02:26 PM
    specific airports owned/operated by MGU-owned holding cos. include Paris, Vienna, Zurich, Auckland and Thailand (6 of them).
  •  
    Roger
    Nusbaum
    May 13 07:12 PM
    My Website
    thanks all,

    the Auckland story is interesting, ticker AIA.NZ, a pension fund in Canada, maybe the teachers in Ontario (which is a biggie), were trying to buy it but the gov't backed away, last i heard. interesting story.
  •  
    JonD
    May 15 09:06 AM
    Roger, how do you feel about pipelines (I own TYG) and other infrastructure sectors such as toll roads and utilities?
  •  
    fingham
    May 15 01:52 PM
    I would worry about being a shareholder in this type of enterprise that is so subject to government interference. Shareholders would likely become bagholders as soon as it becomes politically expedient.
  •  
    Lockstep
    Investing
    Aug 07 12:43 PM
    My Website
    Roger, did you look at all of the Mexican airport operators? PAC, ASR, and OMAB. I wrote a pitch for PAC where I saw prominent inverse correlation between oil and the stock price. So you may have to only look at smoother long term data to find a better correlation between the stock price of the airport operator and the GDP growth.
  •  
    Roger
    Nusbaum
    Aug 07 01:25 PM
    My Website
    I have not looked at the LATAM airports as closely as some others but that might be shortsighted on my part.
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