investingfromtheright

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

March 20, 2007

March 20, 2007: Coal opine and Aero defense tidbits






I deliberately left coal out of the three part series on alternative fuel investments and prospects. Although coal is our most pollutant energy source in relative terms, many experts feel that technology will have to be developed to transform and/or clean burn this resource - mainly because there is so much of it lying around ready to be mined and used.

Coal is NOT dead. Analysts at Credit Suisse First Boston predict that US coal producers will benefit, over time.

The push towards alternative energy sources will move the electricity cost curve higher over time. This means coal will fetch a higher price and thus likely also expand R&D for clean coal technologies.

The abundance of coal (worldwide) coupled with the economics of coal may indicate that it will remain a significant source of future energy needs. Although alternative energy sources will tap into the present coal market and reduce the percentage of coal power plants, etc., the higher costs of these energies will make way for a significant coal presence in future energy projects.

Some clean coal technologies on the horizon include gasification, carbon sequestration, integrated gasification combined cycle (IGCC) power plants, etc.


Although coal stock prices are likely to stagnate (at best) this year, the long term outlook is anything but bleak. I recommend no coal companies at present, but come fall, it might be worth the time to assemble a list of coal stocks to research.



AERO-DEFENSE

> Remember my Deepwater critique last month? The Coast Guard has wisely stripped the Fast Response Cutter-B (58 ships) program from its Deepwater project. The Coast Guard will manage the program internally and mind their own store. NOC/LMT screwed this up but they will have time to rectify problems in the program and retain the work. Sen John Kerry wants the whole Deepwater program rebid. He's a small man living high on the hog with legacy money, and has nothing to offer the Coast Guard program except heavy handed rhetoric. Most lawmakers from both sides of the aisle see this and will not further delay this vital Homeland Security program.

> The Navy is progressing with its LCS-3 program, benefitting LMT.

> BA is looking to re-configure its new 737 with different interior cabin seating configurations that may extend production into the middle of the next decade.

> American Airlines will likekly replace its aging MD80s with Boeing 737-800s.

> Continental ordered five BA 787s, ALAFCO ordered twelve 787s and sic 737s and Volga Dnepr ordered five 747-8Fs, totaling 4.5B for BA.

> Mighty AIRBUS did sell 22 SAS350s to Aeroflot. Rumor has it that they almost gave the planes away.


Recommending the usual suspects:

BE Aerospace (BEAV)
Goodrich (GR)
Precision Castparts (PCP)
Spirit Aerosystems (SPR)
Boeing (BA)
Easterline Technologies (ESL)
DynCorp (DYN)
General Dynamics (GD)
Lockheed Martin (LMT)

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