Many high quality, small-cap stocks still remain deeply undervalued — and offer excellent trading potential, notes Mark Skousen, editor of Home Run Trader.
One of them is Wheel’s Up Experience (UP). Based in New York City, Wheels Up provides private aviation services in the United States through a fleet of approximately 1,500 owned, leased or third-party aircraft.
The cost of owning and operating a private aircraft is prohibitive for many organizations and individuals. However, Wheels Up — the first private aviation company to be listed on the New York Stock Exchange — allows individuals, families and businesses to experience the thrill of private aviation with greater convenience and dramatically lower costs.
Customers get to pick the exact aircraft they need, depending on the trip and the number of fliers. And, Wheels Up uses the latest technology to maximize asset utilization and jet availability. Clients can choose from an expansive fleet that includes the King Air 350i, as well as light, midsize, super-mid and large-cabin jets.
The firm’s proprietary technology and dynamic trip pricing allow real-time pricing by aircraft type, travel date and time. And a capped hourly rate ensures price protection.
Customers who join one of Wheels Up’s membership programs receive greater fleet access, increased travel flexibility and special benefits, including concierge services. Some customers use the company to supplement an existing fleet. Others use it to book single trips for business or personal reasons.
Wheels Up was founded in 2013 and is not yet profitable. However, the firm generates more than $1 billion in annual revenue, and sales are growing at a 55% annual rate.
Given the health and safety fears of commercial flying — along with the daily hassles of airport security — the charter flight business is booming. That’s why three corporate insiders began plowing into the stock a few months ago.
Timothy Armstrong, Chih Cheung and Brian Radecki purchased 125,000 shares at $10 each. (Indeed, insiders own over 30% of the outstanding shares.)
However, traders sold off the stock after the last earnings report. That was a bit surprising, since revenue soared by 55% to $302 million — a record high. The number of active members grew by 45% to nearly 11,400. The number of flights increased by 52% to 19,714. And, earnings per share beat the consensus estimate by 10%.
What happened? The 20% surge in new passengers ran into supply constraints, including a pilot shortage. Wheels Up is temporarily limiting the number of new members and having to ration jet access to existing fliers. But this is temporary — and Director David Adelman knows it.
Adelman has served on the board of Wheel’s Up since October 2013. He is also the co-founder of FS Investments, a money management firm with $24 billion in assets under management. In the past month, he purchased 300,000 shares of Wheels Up at up to $6 a share. He now owns over 1.47 million shares.
And today, you can buy the stock for significantly less than he just did. So, pick up Wheels Up Experience at market. And place a sell stop at $3 for protection.
