Long TAM S.A (TAM) With Short S&P Hedge

Brazilian TAM S.A (TAM) Offers Solid Upside On Robust Free Cash Flow Yield – Currently Holding A Long Position In TAM With S&P Hedge – Original Idea Posted 06/12 Seeking Alpha By Shiraz Lakhi

With a 22.9% free-cash-flow-yield cushion, TAM offers strong upside, despite the current downturn in the airline industry. Operating within the major airlines industry (Brazil), TAM generates a current free-cash-flow of $462.8 million (based on trailing 12 month data), with an enterprise-value of $2.02 billion. The free-cash-flow-yield (FCF/EV) is hence a strongly bullish 22.9%. Additional metrics in favor of TAM include a low price/cash ratio of 2.98, return on equity (ROE) of 47.87% (based on trailing 12 month data), a low price/sales ratio of 0.48 (consensus bullish), and a low (relative to industry) debt/equity ratio of 4.28. I am long TAM, with a dollar-neutral hedged short position in the S&P index ETF (symbol: SPY), in anticipation of TAM outperforming the S&P – by Shiraz Lakhi.