Top Picks 2020: CAE Inc. (CAE)

01/10/2020 5:00 am EST

Focus: TRANSPORTATION

Tony Daltorio

Editor, Investors Alley Premium Digest

In 2017, Boeing (BA) released a study that estimated that the world's airlines would need about 637,000 new pilots over the next two decades to meet demand, explains Tony Daltorio, editor of Growth Stock Confidential.

That works out to be 87 new pilots entering the commercial ranks every day for the next 20 years! About 40% of that number will be needed just to replace the pilots globally that will be retiring over the next 20 years.

The remaining 60% will be needed to cover all the additional flying airlines are expected to do over the next 20 years.

Another study, conducted by the International Civil Aviation Organization, found that the global airline industry will need 980,000 pilots in 2030, more than double the level of 2010. The situation is even more dire in Asia (led by China), which will require another 230,000 pilots by 2030, more than quadruple the 2010 number.

Bottom line: to meet the needs of the air travel industry will require the training of 50,000 pilots worldwide annually! That's where CAE Inc. (CAE) comes in. It has the broadest global presence in the industry, with over 160 sites and training locations in over 35 countries.

CAE has the world's largest civil aviation training network with over 50 training locations, more than 250 full flight simulators, over 2000 instructors and more than 160 aircraft.

And while CAE is a market leader in civil aviation training, it addresses less than a third of what the company estimates to be a $3.5 billion training market.

It says that 50% of the commercial pilots that will be active in 2027 have not begun training yet. CAE predicts there will be a need for 180,000 new captains and 250,000 new first officers over the next decade.

That demand makes for a smooth glide path for CAE. I consider the stock a top pick for conservative investors over the coming year.

(Editor's note: Last year, Tony Daltorio chose Innovative Industrial Properties (IIPR) as his Top Pick; it has risen 66%. He explains, "The marijuana industry has developed much more slowly than expected, forcing some firms to sell their real estate to fund operations. Buying up some of this real estate on the cheap has been IIPR. As the pot industry does develop, this REIT will be there waiting to rent out all this space.")

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