Precision Castparts (PCP) has been on a nasty slide down to $100 since tapping $130 when it reported earnings on May 6, 2008. Stocks who supply products going into commercial airlines, including PCP, continued to be sold off. Investors seem spooked by recent fleet downsizing by the major U.S. carriers on the back of high oil prices and struggling consumers. Or, PCP is getting dumped along with all other stocks related to Defense just because Obama won the Democratic nomination, which people take to mean Obama will be president and that the U.S. will never need a single bullet again or sell our weapons of war to the rest of the world. Geez investors are imaginative!

I don’t believe things have gotten worse for PCP since May 6th. The U.S. fleet downsizing has a minimal, if any, negative impact on PCP’s aerospace business. Like other airplane parts supplier, PCP’s aerospace business is levered to GLOBAL commercial airline demand, which is still flying off the charts. PCP’s direct exposure to Defense compared to its overall aerospace business is limited. More importantly, PCP has large exposure to the hot hot hot global power generation and oil & gas infrastructure. This segment, which PCP calls it’s power generation segment, is growing like a weed such that PCP has to expand 2 new factories to meet demand.

Here’s the plan. Overview of PCP, then the opportunities in power generation, and finally addressing the more complex concerns of the U.S. commercial airline exposure. Read the rest of this entry »