April 20, 2007: Aero defense updates

There have been a few significant developments in the watch list I have regarding aero defense and related fields.

Here is what's new, along with a few recommendations for further research on your part:

The Coast Guard announced that it is taking full control over the sole of LSI for the Deepwater program from Integrated Coast Guard Systems, the Northrup/Lockheed Martin joint venture, which puts all upcoming ICGS contracts in doubt. There is a large outstanding unobligated balance of $1.6B for Deepwater due mainly to problems with the 123-foot patrol boat program as well as the Fast Response Cutter, among others. This means that the Coast Guard, starved for boats that will keep up with their Homeland Security duties, will have to wait longer to receive craft which are replacing boats built as early as the late 1950s. Incredible, isn't it. On the bright side, when the USCG receives new boats, they should be functional. The Deepwater program, I have been told by active USCG personnel, has been a disaster from the beginning.

Losers will be both Northrup and Lockheed, and rightfully so.

GD won a 15 year multi billion IWiN contract over LMT- another big loss for Lockheed.

EDO received a $56M EW award.

LLL received a $95M award from the Navy for joint warfare support.

Army is slowing down purchases due to Congressional budge impasse. Look for body armor and armored vehicles to take a significant cut(AH, FRPT,etc.). See picture above.

Airbus has cut prices of A350 800-900 aircraft to compete with Boeing 787 by 46% and 53% respectively. I strongly believe that the US government should look into the anti-dumping laws on this issue. On the other hand, often you get what you pay for.

BA is the sole bidder for $2.5B South Korean contract for 20 jet fighters.

BA signed SPR to provide component and repair work on the 777 and 737-NG aircraft. Perhaps GR is beginning to loose a competitive edge as I review other awards from other contracts.

Stocks:

Removing LockheedMartin (LMT)from my stock list.

Removing Goodrich (GR) from my stock list (selling half of my portfolio holdings in GR as well)

Removing Northrup (NOC) from my stock list.

Removing Armor Holdings (AH)

Recommended for research on your part:

BEAV
PCP
SPR - looks great
BA - be wary of Airbus dumping its aircraft at a loss to generate business
ESL
DCP
GD
LLL
RTN