Look Out for Asymmetric Warfare
2008-11-26 18:02:45
For our other special focus this week on Homeland Security, we spoke with analyst Brian Ruttenbur of Morgan Keegan & Co. about the state of this space. He told us of one area in Homeland Security that investors should look for opportunities: Asymmetric Warfare.TWST: Are there any other areas that are of interest at this point, Brian? Mr. Ruttenbur: Asymmetric warfare giving the tools to first responders or to the soldiers out in the field to make their intelligence quicker, smarter and bringing it all back into a central network. Predator drone is one example, but there are a lot of examples out there with night vision equipment and other things like that. Asymmetric warfare started with the Defense Department and is now overlapping into homeland security to make our border patrol and other law enforcement agencies leverage their time and their abilities just as soldiers do.For the complete report on Homeland Security and Defense Technology, including a complete overview of both spaces and stock picks, click here.
Top Picks in Aerospace & Defense
2008-11-25 17:47:21
Despite the tough times ahead for Aerospace and Defense, some analysts are seeing opportunities to invest in high quality companies. Alex Hamilton of Jesup & Lamont still feels, despite the economic environment, the following are quality companies that will weather the storm:- Goodrich Corporation (GR)- "I like Goodrich. They have a blue chip management team and an extraordinarily cheap valuation. They're well exposed to the OE side and they're well exposed to the aftermarket side."
- B/E Aerospace (BEAV)- "B/E Aerospace is a company that a few months ago made a $1 billion plus acquisition of Honeywell's (HON) Consumables Solutions Distribution business, which is an aftermarket business. So I think this is a company that has come a long way. This is a company that has diversified themselves into business jets, into aftermarket, the A380, the 787, and I think they're one of the best-positioned names in terms of diversity. They've done a really good job of managing their balance sheet up until this acquisition and they've been through downturns before. They're a well seasoned management team and I think they'll be able to navigate through it again."
- Rockwell Collins (COL)- "Rockwell Collins is an interesting model where half of their business is defense, with a concentration on avionics that benefits from government funded programs, and they leverage that onto the commercial side of their business. So as you can imagine, they have some of the highest margins in the business...I think that their leadership is fantastic and I think Collins' margins are going to hold up in this downturn. They have very little debt, they have good cash flow generation, they're profitable and have top leadership."
Aerospace & Defense on the Defensive
2008-11-24 18:34:03
With President Elect Obama coming into office on January 20th, the stage has been set for the "change". The only question now is: what will it look like? In our special focus on Aerospace and Defense this week, we spoke to Rick Whittington of JSA Research about what President Elect Obama's priorities will be in terms of defense spending, and how it will effect companies in this space:The new President-elect has been pretty clear and his policies and tenor of office I think are already pretty well sketched out. He wants to shift to domestic priorities and away from military.We ask Mr. Whittington if there was anywhere to look in the military space. Are there any winners in there?
In the defense area, among the large pure plays, no. They're all losers. We downgraded everything the day after the election and we had already downgraded some previously, but we finished that off and our message to investors is stay away from the military-exposed companies and focus on the commercial. There are going to be no winners in the short term.That being said, this decrease in focus on military spending is not something that Mr. Whittington is unfamiliar with:
We've been here before, so it's not new and in the past 50 years, we've had three instances where military spending was sharply curtailed after a significant upturn and so I think we know what to expect.For the full Aerospace & Defense issue, including a complete overview of the sector, including interviews with CEOs of top companies and stock picks in the turbulent time, click here.
Top Picks in Internet Infrastructure
2008-10-23 17:23:35
Our other special focus this week is on Internet Infrastructure. We spoke with analyst Rodney Ratliff of Stanford Group Company about his top picks in this space during this turbulent time for the markets:- Akamai Technologies (AKAM)- " My favorite stock right now, the one I picked for our monthly focus list, is Akamai. You are talking about a company that is generating ridiculous amounts of free cash flow. In the most recent quarter, Akamai generated $70 million in cash flow from operations. In terms of free cash flow, in fiscal year 2008, I am projecting that they are going to generate about $158 million in free cash flow...So in terms of self-funded status and the ability to weather even a prolonged downturn, I think we are looking at a winner here, especially considering the stock's trading now near a five-year low."
- Equinix (EQIX)- "The appeal there is simple. Content has gotten so dense, and so bandwidth intense, and is only going to get more so...Equinix can provide for customers a data center with a massive footprint that features the availability of 250 or so network providers in any given individual data center, 24/7 support and very effective ventilation and air conditioning to keep equipment running optimally. The biggest appeal is the availability of a wide selection of networks providers, which enable the client to bid network providers against each other which improves cost of operation. So it comes down to build versus buy."
What Investors Are Saying About Semiconductors
2008-09-18 18:08:51
Moving back to our focus this week on semiconductors, we asked the analysts on our roundtable to talk to us a little bit about what they hear from investors in this space. Here's what they're hearing about investor interest in semiconductors:"I think that there is modest interest in this space. I don't have people calling me and saying, "I have to get long in the semis right now because this is the best sector to be in since sliced bread." I am certainly not getting that, but I do get people looking more at longs than at shorts." "In the communications space, and more specifically in small cap communications names, there has been very little appetite of late among investors. I think that in these kinds of markets where there is uncertainty, many of the investors that I talk with move toward larger and more defensive positions in companies that have less leverage, but a little more predictable earnings power." "My sense is that investors want to get more positive on semiconductors. They want to find reasons to start investing. If you think about it, valuations are pretty attractive and sentiment has been beaten down. These are good elements to the stock thesis now. The problem is demand and the health of the industry and of the end markets. The long-term investors that I talk to are looking for companies out there with compelling technologies that enable share gain and significant growth over time. That is what the longer-term guys are looking for."For the complete roundtable forum on semiconductors, including an outlook for this space and stock picks, click here.