November 25, 2008
Despite the tough times ahead for Aerospace and Defense, some analysts are seeing opportunities to invest in high quality companies. Alex Hamilton of Jesup & Lamont still feels, despite the economic environment, the following are quality companies that will weather the storm:
- Goodrich Corporation (GR)- “I like Goodrich. They have a blue chip management team and an extraordinarily cheap valuation. They’re well exposed to the OE side and they’re well exposed to the aftermarket side.”
- B/E Aerospace (BEAV)- “B/E Aerospace is a company that a few months ago made a $1 billion plus acquisition of Honeywell’s (HON) Consumables Solutions Distribution business, which is an aftermarket business. So I think this is a company that has come a long way. This is a company that has diversified themselves into business jets, into aftermarket, the A380, the 787, and I think they’re one of the best-positioned names in terms of diversity. They’ve done a really good job of managing their balance sheet up until this acquisition and they’ve been through downturns before. They’re a well seasoned management team and I think they’ll be able to navigate through it again.”
- Rockwell Collins (COL)- “Rockwell Collins is an interesting model where half of their business is defense, with a concentration on avionics that benefits from government funded programs, and they leverage that onto the commercial side of their business. So as you can imagine, they have some of the highest margins in the business…I think that their leadership is fantastic and I think Collins’ margins are going to hold up in this downturn. They have very little debt, they have good cash flow generation, they’re profitable and have top leadership.”
For the complete Aerospace & Defense report, including a complete overview of the state of this sector in this tough economic time and more stock picks, click here.
