Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 50% Gains Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (63011)	8/17/2008 2:22:57 AM
From: Robohogs	Read Replies (2) \| Respond to of 118717

I used to be an banker to the sector, mainly focused on midcaps and smallcaps and mainly focused on the financially leveraged companies - did several LBOs in space. As a quick disclosure, I have my mom in GR - told her to sell it about 10% before the top but she hates selling anything. GR is extremely diversified - its main problem is it trades like the sector. Most of the money in the sector is made when new builds are going up because Airbus and Boeing need stuff quicker and are willing to pay. In downcycles both cut prices and squeeze suppliers. GR has good balance between high tech stuff (cockpit electronics, safety components, brakes - yes, brakes) and more mundane parts as well as military vs. commercial and new build vs. old build. GR almost cannot help but trade like sector. Sector has sold off hard and is now bouncing. Even if oil spikes, the new build stuff should hold up ok because of the new engines and new aircraft coming which are more fuel efficient (787, A350). Those more exposed to replacement parts might not do as well over next few years given retiremet of a bunch of older MD80s and 737s. Some will end up in fleets in poor regions of the world but some will become scrap. Fuel is the key determinant. As a safe investment that should not blow up, GR is the stock - even if it has moderate amounts of exposure to replacement parts and maintenance. Its diversification is key. I probably prefer PCP and BEAV overall however. PCP is just as safe and has similar exposures plus generator parts for engines and new tech engine components on the way - best technology out there along with Alcoa (where Howmet ended up). BEAV is also key in aftermarket (more so than new builds) but should hold up well given its newer seats are lighter and help airlines compete on quality. HXL, another riskier play, is one I like because of its new build exposure on newer platforms (if new orders stop dead it has almost no commcl airline biz because they don't replace its components). The other two in the sector to study are TGI and Transdigm. Main problem is both are exposed to aftermarket/replacement sales in a pretty big way. If oil stays here or comes in more, ok. Otherwise, ??? The main key to performance here will be oil. If it goes up, whole sector likely to have contracting PEs despite performance. If oil comes off, airlines get healthier and PEs for suppliers go up. Jon Jon