investingfromtheright

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

March 05, 2007

March 6, 2007: Aero defense stocks: bits and pieces






Pictures: Chinese military, US military, Oshkosh military truck (example), Oshkosh fire truck (worldwide reputation for excellence)


The old saying, "the best defense is a good offense" is not lost on the Chinese, who have dramatically increased their strategic offensive weapons program(s). This has planners within our military highly concerned. Speed reigns supreme as we play catch-up to Chinese surprises, such as the attempted blinding of our spy satellites with sophisticated laser weapons. There is no doubt - zip, zero, nada - that unless we move on a fast track with 21st century weapons, the year 2015 will be the time we are no longer the dominant military in the world. To have a communist state number one puts the democracies at risk, even moreso than 1939, the year of the Nazi/Soviet Treaty of Friendship which led to the carving up of Poland and worse.

>The GOA upheld a protest by LMT and UTX of the multi-billion USAF CSAR-X program, which had been won by BA. Indefinite hold.

>Latest tranche of MRAP awards went to GD/FRPT, OSK and privately held Protected Vehicles, Inc. As predicted on this blog, the exclusivity of FRPT was not going to occur with this program. The armed services have divided the production between several capable companies to ensure fast delivery of vehicles to protect our armed forces from most roadside bombs.

>The Army National Guard has submitted a $24B unfunded request to Congress including $5B for FMTVs and $1.6B for Humvees.

> Democratic Sen. Conrad's $20B defense cut proposal was shot down by both party leaderships.

>The Army LOGCAP 4 award is now expected to be finalized by mid-summer to early fall.

>Boeing (BA) posted 51 orders in February cashing out at over $8B vs. 25 in 2006.

>BE Aerospace won a $250M contract for OE/Retrofits.

>Airbus approved another restructuring plan, amidst strikes by German workers, which is said to mirror Boeing's strategy of outsourcing, etc. Hooray.

>UPS has killed their order to purchase 10 A-380 Airbus aircraft.

>Japan Airlines (JAL) is considering buying many more Boeing 777s and 787s at the expense of Airbus.


Recommended defense stocks that should hold up well during a reasonable correction:

BE Aerospace (BEAV)
Goodrich (GR)
Precision Castparts (PCP)
Boeing (BA)
Esterline Tech. (ESL)
Armor Holdings (AH)-- very close to full value now
DynCorp (DYN)
General Dynamics (GD)
L-3 Communications (LLL) -- very close to full value/possible legal issues
Lockheed Martin (LMT)
Northrup Grumman (NOC)
Oshkosh (OSK)

Pick one? BE Aerospace
Pick another? Goodrich
Trifecta? Oshkosh on weakness (under 50)

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