Richard Safran, Managing Director, Analyst, Seaport Research Partners
Titanium is the ultimate winner in the current expansion of the US economy according to these interviews with expert equity analysts.
One of the biggest titanium fans is Richard Safran, Managing Director and analyst at Seaport Research Partners.
He is an aerospace and defense equity research analyst and former aerospace engineer and program manager.
He started his professional career working at Northrop Grumman on the B-2 program, then on to business development and strategic planning, and later program management.
Richard was previously the aerospace and defense analyst at Goldman Sachs.
He graduated from the University of Buffalo and received an MBA from Columbia University.
In his 3,397 word interview, exclusively in the Wall Street Transcript, Mr. Safran details how the industrial and aerospace sector works for investors in the United States.
“…Aerospace and defense is really two distinct sectors masquerading as one.
So they move to a bit of a different drumbeat.
The small- or mid-cap guys tend to be suppliers to one or more of the major OEMs. Allegheny Technologies (NYSE:ATI), for example, provides metal that goes into both engines and airframes for both aerospace and defense.
Same for Hexcel (NYSE:HXL), they provide carbon fiber composites that go into aircraft and engines.
On the aerospace side, what’s happening with most aerospace suppliers right now is they are tied to Boeing (NYSE:BA) and Airbus’ (OTCMKTS:EADSY) backlog and they pretty much follow what happens with the companies.
In other words, if you’re more heavily dependent on the wide body, that’s only starting to recover because of Boeing’s issues on the B787. More dependent or more exposure to the narrow body, you’re doing a bit better because at Boeing at least, the MAX had an earlier recovery than the 787 did…
OEM and prime contractors like Boeing and Lockheed are at the top of the value chain.
Tier 1 suppliers are those that supply engines, like General Electric (NYSE:GE) or Pratt & Whitney, part of Raytheon (NYSE:RTX), engines, avionics, or major structural assemblies like Spirit AeroSystems.
Tier 2 and 3 are component and subsystem suppliers, like Curtiss-Wright (NYSE:CW) and others, and they supply to the OEMs. And then, Tier 4 are base metal alloy and materials suppliers…
I think that the more interesting story right now is on some of the metal suppliers.
For example, the big thing right now has been the de-risking from Russia, which has shown itself to not be a very good business partner.
Boeing was getting about 30% of this titanium from, I think, VSMPO-AVISMA Corporation in Russia.
I think Airbus was getting even more, probably close to 40% of its titanium from Russia.
I think it has been abundantly clear for some time that things can’t continue the way they have been because aerospace and defense need good, reliable — and the key here is — long-term suppliers.
Russia has not turned out to be a very good one.
And so, a lot of that market share now, for example, in titanium is falling upon companies like Precision Castparts, which is part of Berkshire (NYSE:BRK.A), Allegheny Technologies ATI, and maybe some other smaller firms and companies like, for example, Toho Titanium (OTCMKTS:TTNNF) and things like that.
Right now share gains are important, and for example in the base metal suppliers, I like the stock ATI, because I think they stand to benefit inordinately from this de-risking from Russia and the sourcing of titanium, the alternate sourcing of titanium.”
Nick Heymann is co-group head of global industrial infrastructure at William Blair
And the demand for metals such as titanium will only increase as US based manufacturing sky rockets, according to Nick Heymann, co-group head of global industrial infrastructure at William Blair.
Previously, he was managing director of global industrial infrastructure equity research at Sterne Agee.
This expert analyst was an Institutional Investor All-American nine times and was ranked as the No. 2 stock-picker in electrical equipment by the Financial Times/StarMine.
In his 5,762 word interview, exclusively in the Wall Street Transcript, he sees enormous opportunities in the US economy and for investors in that economy.
“In the last 12 months, through the end of December, actual U.S. manufacturing construction on a trailing 12-month basis up 190% versus the prior 12-month period.
And it probably will continue to rise to somewhere near 250% to 300% for new starts for production facilities, not announcements.
So these huge amounts that were announced last year and are continuing at a feverish pace this year are going to continue to drive higher manufacturing construction well into 2024, and maybe even 2025 or 2026.
So again, most of our diversified industrial companies make the guts of what goes into factories and their automated production lines, as well as the equipment used to construct, insulate and paint them.
And of course now, we have ubiquitous automation in most factories which is being augmented by the tight labor market.
The investment in automation today versus a factory put up in 2003 or 2004 is probably on the order of 15 to 20 times larger.
So, it’s a very exciting time, an unparalleled time to be involved in investing in the industrial sector, which is why the market is reweighting the industrial portion of the overall market.
Higher rates normally would be a depressant for industrial capital spending.
It has tempered spending on the consumer durables sector for cars as higher-priced car loans and home mortgages are dampening demand, especially for tangible products that go into the home.
But outside of that segment of the industrial space, there is robust demand for oil and gas, mining, semiconductors and the pharma sectors.
By re-shoring our strategically important pharmaceutical industry, it’s creating an immense amount of demand for process control on automation and laboratory separation investments.”
So not only titanium but the entire range of industrial production and development in the United States will be in demand, from the painting new factories to the final finished products rolling out the doors and onto our internal transportation grid, all due to the implementation of the Infrastructure Investment and Jobs Act, the Chips-Plus and the IRA legislation.
Get the complete picture on these US industrial companies by reading the entire 5,762 word interview with Nick Heymann and the entire 3,397 word interview with Richard Safran, exclusively in the Wall Street Transcript.
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