Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable, global trend as a support. And with the aforementioned in mind, Precision Castparts (NYSE: PCP) is worth a review.
Just call Precision Castparts a hybrid cyclical/defensive. The company is a large manufacturer of forged components for the power generation market, and in case one hasn't noticed, upgrades and expansion of power generation facilities should benefit from the Obama administration's initiatives to renovate the nation's electric grid, among other energy projects. Demand for industrial gas turbine parts should remain more than adequate.
Still, the major revenue driver for PCP is up in the air, literally. Precision is a major maker of jet engine components, and although only modest growth is expected in the sector, due to moderating demand, PCP will benefit as production of Boeing's (NYSE: BA) 787 Dreamliner starts to increase, moving forward. The First Call F2009/F2010 EPS estimates for PCP are $7.41/$7.80.
Other strengths: The company is known for its reasonable-cost, high-quality work with timely delivery, and in this economic climate, that's a decided competitive edge.
Stock Analysis: Precision Castparts is a moderate-risk stock. Consider buying a 25% position in PCP now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your PCP position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $32.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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