June 30th, 2008
My latest column is up at RealMoney.
New orders for manufactured durable goods in May increased slightly to $213.6 billion, the U.S. Census Bureau announced last week. This was the first increase in three months, and it followed a 1.0% April decrease. Excluding transportation, new orders decreased 0.9%. Excluding defense, new orders decreased 0.6%.
Behind that bland summary, though, is usually a wealth of information that I believe could be useful for picking the best industries in which to invest. This month, the signal was clear. Get defensive. Among a sea of industries seeing declining sales and orders, one stood out for its strength: defense aircraft and parts.
Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.
Topics:
L-3 Communications (LLL),
Raytheon (RTN),
Esterline (ESL),
Heico (HEI),
DRS Technologies (DRS),
Northrop Grumman (NOC),
General Dynamics (GD),
Airbus (EADSF.PK),
Boeing (BA),
Lockheed Martin (LMT),
Aerospace and Defense,
Rockwell Collins (COL),
Capital Goods |
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May 19th, 2008
My latest column is up at RealMoney.
TTM Technologies (TTMI) manufactures printed circuit boards for the high-end commercial and aerospace/defense markets. The company focuses on a “quick-turn” model that can provide custom-fabricated PCBs to customers within as little as 24 hours. This strategy allows TTM to charge a premium for quick-turn services (which account for 15% of total revenue) and insulates TTM from the extreme cyclicality faced by most electronics manufacturing services (EMS) providers. In the last 10 years, the company reported just one year of net losses (2002).
TTM’s largest original equipment manufacturer customers in 2007 were Cisco (CSCO) , Honeywell (HON) , Juniper Networks (JNPR) , Northrop Grumman (NOC - Annual Report) and Raytheon (RTN) ; these OEMs accounted for a combined 24% of total sales. More than half of total sales were to EMS providers including my favorite, Celestica (CLS - Annual Report) , as well as Flextronics (FLEX) , Jabil (JBL) and Plexus (PLXS) . The diversity of customers and end markets should shield the company from short-term market share fluctuations among customers.
Here’s how the company fares in the Stock Market Beat models:
- Earnings momentum - positive
- Earnings quality - positive
- Price momentum - positive
- Free cash flow - positive
- Return potential - neutral
Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.
