April 10, 2007: Aero defense updates and passing gas on EnCana

Fortunately, our anti-missile program works, and the Chinese efforts at blinding satellites by lasar have been recognized and neutralized - for now.






Right to the points:

NOC won the $256M contract for the USMC G/ATOR radar, after a protest from a competitor was dismissed.

LLL won the UKs Project Helix contract at $756M/7 years.

ATK acquired privately held Swales Aerospace, a satellite component manufacturer. This is a good deal for ATK. I would follow this stock and see what happens to earnings and cost efficiencies.

Boeing (BA) announced that 787 aircraft orders have reached 514 from 43 customers to date. Over 105 aircraft were produced and delivered by BA during the first quarter of this year. Most popular were the next generation 737s, totalling 83.

Rockwell Collins (ROC) has earned avionics contracts for 85 Boeing 737NG aircraft and all of Singapore Technologies avionics contracts for their C-130 fleet. This could begin to erode Goodrich earnings and should be watched beginning third quarter of this year.

ERJ has 100% production quotas of its 170/190 aircraft for this year and 85% for 2008. ERJ will increase production to 14/month. ERJ has been a recommended stock on this post for months.

Aero defense recommendations:

Boeing (BA)
Goodrich (GR) but watch this one carefully
Precision Castparts (PCP)
Sprint Aero Systems (SPR)
TransDigm Group (TDG) -almost new on the list
BE Aerospace (BEAV)
Esterline Technologies (ESL)
Rockwell Collins (COL)- almost new on this list
DynCorp (DYN)
General Dynamics (GD)
L-3 Communications (LLL)-upgrade for this stock, IMO
Northrup Grumman (NOC) - lots of clout at the DoD
a few prior recommendations appear to be fully priced at this posting date.

ENCANA: This is an exceptional multi-level clean energy play. I am strongly considering adding this to my portfolios to accompany Chesapeake Energy (CHK), a core holding of mine.

ECA is clearly positioned to benefit from tighter North American natural gas supplies. ECA is a low-cost producer with assets in Canada(70%) and the US (30%). Safe, secure and easily developed. Trading around $53.00/share, I think a price by year's end of $70.00+/share is probable.

One reason, Canadian gas inventories are 30% BELOW last year. Exports to the US could fall as much as 1.0Bcf/d as Canada fills needed storage capacity. This will benefit Chesapeake concurrently. Another reason, gas will be produced at a record rate by ECA from their share of the Alberta oil sands, while other producers see mature gas fields in decline. More gas at a higher price for ECA.

The oil sands oil and gas are a long term ace in the hole for ECA. Now that the Canadian government has eliminated the trusts, it is highly unlikely that ECA will break itself into parts instead of keeping the company whole. This is a good thing for investors interested in growth as well as income.

EnCana's recent joint venture with Conoco Phillips to develop EnCana's Foster Creek and Cristina Lake bitumen projects with Conoco Phillips' Wood River and Borger refineries is a key transaction unlocking the vast potential of Encana's bitumen resources (this is a 6.6bbls asset) on the cheap.

I like this somewhat under-reported story. Very much.