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Welcome to Profit Confidential • Tuesday, May 22, 2012

This Sector Showing Profit Potential

Thursday, December 13th, 2007
By George Leong, B.Comm. for Profit Confidential

After a recent decline to the $87.00 level, the price of the basis January light sweet crude on the New York Mercantile Exchange rebounded back over $90.00 per barrel in trading on Tuesday. But while the continued high oil prices negatively impact the airline sector, there is some hope. Capacity, as measured by the seats sold as a percentage of available seat miles, is on the up. Airlines as a group will continue to struggle given the high fuel costs and competitive pricing, but I believe the potential lies with the airplane and parts makers.

We are once again seeing some life resurface in the aerospace stocks, such as The Boeing Company (NYSE/BA), which has recovered from below $30.00 in early 2003 and touched a 52-week high of $107.83 on July 25, 2007, representing a gain of over 200% in about three years. Boeing is doing well as the demand for new airplanes steadily gains. Strong demand out of China and India for planes is driving the demand. China is buying Boeing planes, and there is the potential for thousands more over the next decade, as China steadily grows its commercial airline sector and demands new planes. The recent price decline was driven by fears of delays with its new “Boeing 787 Dreamliner” super jet, but I view this as a near-term problem.

On the parts side, take a look at Wellington-FL-based BE Aerospace, Inc. (NASDAQ/BEAV; Market-cap: $4.58 billion). BE makes cabin interior products for the new and retrofit airline market, including commercial airlines and business jets.

BE Aerospace is benefiting from a pick-up in the aerospace industry, especially with the launch of super-sized planes from Boeing and Europe-based Airbus. BE announced that it had received supply contracts valued at over two hundred million dollars from numerous global airlines. The wins included supply orders for the new jumbo liner, Boeing 787 Dreamliner.

China will continue to be a strong market for BE. Bookings from Chinese airlines were about one hundred million dollars in 2006 and I expect this number to rise going forward.

Given the company’s record backlog, co-founder and CEO Amin Khoury expects to see strong revenue growth and margin expansion through 2009.

In all, the high oil prices are a concern, but we like these two aerospace stocks going forward.

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Profit Confidential AuthorGeorge is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.

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