Precision Castparts: an Abandoned Growth Story, Part I

Precision Castparts (PCP) has been on a nasty slide <!---->down to $100
since tapping $130 when it reported earnings on May 6, 2008.  Stocks
which 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 suppliers, 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.