The other day, Allegheny Technologies Inc. (NYSE: ATI), the largest stainless steel producer in the U.S., experienced a steep decline in share price. This company produces not just stainless steel but also titanium and other materials, as well as develops engineered products used in cutting tools and diecasting, usually to be used in the aerospace, automotive, and appliance sectors.

When the investor sees a fall in share price, there are two conclusions. Sometimes these types of price drops are warranted; sometimes they scream to the savvy investor: opportunity! This is a case of the latter. The reason for the drop the other day was a company report that stainless steel and nickel prices were volatile and falling, which then negatively impacted its stainless steel segment. This report prompted share prices to fall by $10 -- well beyond what I feel was warranted.

In addition to falling prices, ATI's prospects were dampened recently when Boeing announced that it would deliver its Dreamliner 787 planes six months later than expected. Each plane required 250 THOUSAND pounds of nickel, which ATI was going to supply, so this is a blow. Provided this delay doesn't get extended, I don't see it affecting ATI in the long turn. The management is solid, and demand for its specialty metal product isn't going away.

Specialty metals producer Allegheny Technologies Inc. (NYSE: ATI) is in the very enviable position of having record demand for its products despite rising prices averaging 4-39% for those same products. First off, the stock is up almost 30% for the year, opening the year at $88.45, and closing on July 13 at $114.97, up $.67. Analysts consider $125 to be a fair target, so there is still plenty of movement left in the stock. Its P/E of 16.85 is significantly below industry average, while its 6.47 EPS is very much above industry average. Return on stockholders equity is above 50%, and the company has half a billion dollars on hand in case it likes the look of other companies to acquire.

Allegheny Technologies recently posted record quarterly profits for 1Q 2007. Sales increased 32% to $1.37 billion. Net income increased a whopping 86% to $198 million, about $1.92 per share, almost double the net income of 1Q 2006. Demand for its higher priced titanium-based products has reached record levels in the aerospace and defense industries. Demand of what CEO L. Patrick Hassey terms "exotic alloys" is at a record level. ATI is building additional capacity to service this demand, which shows no signs of abating, despite significant increases in the costs of raw metal materials. ATI has instituted cost containment measures to help counteract the hike in raw material prices.

ATI consists of three main product divisions. High Performance Metals is the largest division and deals primarily with titanium related metals used in aircraft construction. Despite capacity expansion, this division is facing record backlog orders to satisfy demand. Sales in this division increased 35% to $477 million for 1Q 2007. Sales in the Flat-Rolled Products division increased 20.4% for an operating profit of $160 million, despite a noticeable decline in shipments of commodity stainless sheet metals. The Engineered Products division deals with tungsten-related products. ATI is currently expanding capacity for this division and hopes to increase production significantly by the end of 2Q 2007. ATI posted revenues in excess of $5 billion for the most recent four quarters, and expects that figure to increase as 2Q 2007 figures surpass record levels set in 1Q 2007. There does not seem to be a downside to this stock at this time.