The outlook for the aerospace sector’s stocks is healthy and currently undervalued, according to Pierre Chao, managing director of Credit Suisse First Boston.
The industry has been recovering for the past year from the failure of the satellite telephone company Iridium. Because of this, many investors decided to dump defense related stock in favor of higher-growth internet and communications stocks but recently investors have begun to return to the more traditional aerospace industry, boosting the sector’s stock prices.
John Higginbotham, CEO of SpaceVest, a Reston, Virginia venture-capital firm specializing in space companies, expects the market to grow thirty times over in the next few years. Currently, aerospace stock is outperforming utility stocks and the broader market, recently rising 40-60% from their 52 week lows.
The challenge, according to Chao and Higginbotham, is getting good technology to new markets. Space tourism is one way in which aerospace technology usually reserved for defense programs can move into the public sector. Small steps are being taken to make that happen, but at the moment, there is more focus on the defense side of things. Investors, when they do offer their money for aerospace projects, have been focusing those funds on ‘sure things’ such as technology that will be utilized in the wars that the US is currently involved in.
Commercial space ventures have a huge potential for growth, government related space business doesn’t look as good. Because of the instability of government programs and the risk of Congress taking away money earmarked for aerospace programs, outside investors are disappearing with their money.
The issues that the aerospace sector is facing requires assistance from federal agencies in order to be overcome, but even without that, the markets are doing well.
Some of the most dynamic stocks in the aerospace sector include:
Boeing Co. (BA)
General Dynamics Corporation (GD)
General Electric Company (GE)
Goodrich Corp (GR)
Honeywell Intl Inc (HON)
Lockheed Martin Corporation (LMT)
Northrop Grumman Corporation (NOC)
Raytheon Co (RTN)
Sequa Corporation (SQA.A)
Textron Inc. (TXT)
United Technologies Corporation (UTX)