B/E Aerospace Inc (NASDAQ:BEAV) Improves Competitive Position

April 28, 2016

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B/E Aerospace Inc

Eric Fuhrman, Portfolio Manager at HGK Asset Management, says investors never dove into B/E Aerospace Inc (NASDAQ:BEAV) because of worries about low oil prices. However, since he has purchased the stock, BEAV is up 23% and has a solid competitive position.

When oil prices fell, investors became worried about BEAV’s backlog because there is less of a need to have more fuel-efficient planes in the face of low oil. A lot of BEAV’s backlog is interior components for these lighter, more fuel-efficient models.

But what the market missed is that this is a company that’s an industry leader. They have a very attractive competitive position, and they operate in an industry with a strong long-term outlook and backlog and good visibility. In the very short term, through 2017 or so, there aren’t large growth prospects, but we are being more than compensated by their current cash generation.

In the meantime, they are improving their competitive position, with a greater share of the market and a lower cost structure; this is the part that makes for a great investment. The aircraft-component market is becoming more and more integrated and complicated, and BEAV’s coordination capabilities are a key source of competitive advantage.

We’re also seeing a major competitor falter lately, which BEAV has the opportunity to capitalize on. They also have an opportunity to grow content per plane, as plane interiors become more complex. Aircraft manufacturers want to do business with large suppliers that can make systems work together, and this is where BEAV is competitively advantaged. We have a high level of conviction in this name.