Buy CAE on the pullback, this investor says

Newhaven Asset Management CEO and portfolio manager Ryan Bushell says CAE (CAE Stock Quote, Chart, News, Analysts, Financials TSX:CAE) looks attractive after a pullback, with lower expectations and a stronger structural backdrop supporting the stock.

Speaking on BNN Bloomberg’s Market Call on June 22, Bushell said the recent weakness was tied partly to concerns about the war in Iran, higher jet fuel prices, potential shortages and flight cancellations.

For CAE, he said weaker aviation demand would filter through to less pilot training. But Bushell said the longer-term drivers remain intact.

“What you’re seeing below the surface is there’s still some strong structural trends on new aircraft rollouts,” Bushell said. “New aircraft means more training.”

He also pointed to pilot retirements, new pilot hiring, strength in the business jet market and CAE’s defence contract wins as supports for the business.

Bushell said CAE’s May investor day disappointed analysts because guidance was not as strong as expected. But he said that reset may now work in the stock’s favour.

“Now we’ve had expectations knocked down,” he said. “There are so few stocks in the marketplace today that have lower expectations and low bars to clear, with a good structural backdrop.”

Bushell said CAE’s free cash flow profile could eventually allow the company to reinstate its dividend, which was cut during the pandemic, potentially by 2027 or later this decade.

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