Rolls-Royce
In less than two years, shares of British aerospace giant Rolls-Royce have dropped close to 90%! COVID-19 hurt this company particularly hard. As of now, the company has a market cap of some GBP 10 billion, which makes it still very sizeable.
This is a company that’s been around since the 19th century. The company’s Silver Ghost was hailed as “the best car in the world” in 1906. Rolls built the engine for the supermarine Spitfire, the plane that helped defeat Adolf Hitler in the air over London in World War II. In 1953, Rolls entered the civil aviation market. In 1960, the company introduced the world’s first turbofan jet engine. Now it’s one of the largest manufacturers of jet engines in the world. (Rolls sold off its car business in 1998.)
The company has reduced its cash-burn rate by £1 billion, while simultaneously acquiring an additional £7 billion in liquidity. That’s more than enough to carry it through the pandemic. Management predicts the company will be cash-flow positive next year. Investors willing to take a little risk now should be rewarded handsomely as the aviation market opens up again.