Earnest Buys Hexcel’s Dip: A Patient Gamble

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What transpired

On a humid August morning, the SEC’s filing revealed a quiet transaction: EARNEST Partners LLC had acquired 418,477 shares of Hexcel Corporation (HXL), a purchase costing $22.13 million in the quarter’s tepid market. The fund now holds 5,140,542 shares, valued at $290.39 million-a sum that might buy a modest island but here represents hope in carbon fibers and aerospace composites.

Further notes

The purchase nudged Hexcel to 1.3% of EARNEST’s 13F portfolio-a sliver of faith in a sector where aluminum dreams of flight. Among their holdings: CBRE Group ($496.38 million), Reinsurance Group of America ($476.32 million), and GATX Corp ($473.92 million), each a titan compared to Hexcel’s $61.57 share price, which lingers like a forgotten guest at a party.

The stock, down 17 percentage points against the S&P 500 over the year, offers a dividend yield of 1.07%-modest enough to make a shareholder sigh into their ledger. Its forward P/E ratio of 25.11 suggests optimism, though the EV/EBITDA of 28.82 whispers of valuations stretched thin, like composite materials under undue stress.

The company, distilled

Metric $4.9 billion
Revenue (TTM) $1.88 billion
Net Income (TTM) $88 million
Dividend Yield 1.07%

Profile

  • Hexcel crafts carbon fibers, prepregs, and engineered aircraft components-materials that promise lightness and strength to an industry burdened by delays.
  • Revenue flows from composite sales to aerospace giants, defense contractors, and industrial firms who demand perfection but settle for supply chains in disarray.

The company’s global reach spans continents, yet its fortunes remain tethered to the whims of Airbus and Boeing, whose backlogs-8,754 and 5,900 planes, respectively-glint like mirages in a desert of unmet demand.

A meditation on timing

EARNEST’s purchase is not a leap of faith but a crouch, waiting for the market’s pendulum to swing. Hexcel’s margins, frayed by overcapacity, mirror the human condition: preparing for feasts that never arrive. The aerospace sector’s supply chain knots tighten daily, yet the orders persist, stubborn as old debts.

One might scoff at the notion of patience in an era of algorithmic trades and quarterly earnings obsession. Yet here we are: Hexcel’s composites, critical to tomorrow’s aircraft, await a world that has postponed its flight plans. The dividend is meager, the multiples lofty, and the backlog a relic of pre-pandemic ambition. And still, the shareholders linger, like travelers at an airport bar, nursing drinks as delays compound.

The Fool’s verdict? Buy the dip, perhaps, but keep your coat handy. The industry’s engines roar, yet takeoff remains a rumor. In this interlude, we count dividends like breadcrumbs and whisper to ourselves that recessions, like runway delays, are temporary. Or are they? [glossary] 🚀

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2025-08-21 19:42