investingfromtheright

I am retired and take educated guesses on all things financial.

January 05, 2007

January 7, 2007: Aero Defense news

Regular readers of this blog know I am bullish on the aero defense sector, and specific stocks in that realm.

ALL BOEING:
Recently,Boeing (BA) received an order for ten 787s from Jet Airways. Boeing also announced that the first of the next generation 737-700ER was completed. How many of us fondly remember the earlier 700 series many years ago. What a time-tested gem this has turned out to be for Boeing. Meanwhile, AIRBUS is trying to hand machine parts for their busted superjet. Boeing announced a record 1044 orders and 398 deliveries in 2006.

BE Aerospace (BEAV) announced that it expects to raise its 2007 outlook.

Airbus sold eight aircraft to Pegasus Aviation Finance. Airbus seems to be giving away aircraft at this point to stay in the game.

GD and AM General formed a joint venture to compete for the USMC-Army Joint Light Tactical Vehicle program.
GD received a 1.3b contract for VA submarine procurement as well as a modest 145m contract for Stryker logistics support.
GD and FRPT agreed to form a joint venture to compete for the Category 1 and 2 aspects of the joint MRAP vehicle program.

InsideDefense.com reported that President Bush may seek a budget boost for permanent increase in the size of the Army and USMC.

NOC may have the advantage in the 8.8b/7 year management contract for the Lawrence Livermore Lab.

Aircraft component supplier Goodrich (GR) is best positioned to profit from only limited exposure to older, fuel guzzling aircraft that are being retired early by most airlines.Other suppliers may be hit in their bottom line by having too many parts for aircraft sitting in the desert awaiting dismemberment.

Companies I like include:

BE Aerospace (BEAV)
Boeing (BA)
Dyncorp (DYN)
Embraer (ERJ)
Goodrich (GR)
L-3 Communications (LLL)

A few readers asked about General Dynamics. I think that GD is fully valued for now, with the assumption that GD will be the winner of many defense contracts built in to the price.

I reviewed the PowerShares Aero and Defense ETF (PPA). I believe that this sector is not ETF-friendly at this time. Well selected individual stocks such as Goodrich and BE Aerospace (to name but two of several) will outperform a sector index in 2007, as far as can be extrapolated.Visit www.powershares.com to see for yourself.

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