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Why You Should Have Money in Aerospace

Why You Should Have Money in Aerospace

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Published by gloriasimmon
http://www.investmentcontrarians.com/stock-market/why-you-should-have-money-in-aerospace/1349/

We all know how significant the Chinese aerospace market is, given the superlative rise in air travel and tourism in and out of the country. I expect this to increase going forward.
The Boeing Company (NYSE/BA) estimates that China will require 5,000 aircrafts, valued at approximately $600 billion, over the next 20 years. The estimate may be conservative, especially if China can grow its income levels at a much higher pace. Boeing is looking at its new 787 Dreamliner as its big play on wide-body jet travel in spite of current issues.
http://www.investmentcontrarians.com/stock-market/why-you-should-have-money-in-aerospace/1349/

We all know how significant the Chinese aerospace market is, given the superlative rise in air travel and tourism in and out of the country. I expect this to increase going forward.
The Boeing Company (NYSE/BA) estimates that China will require 5,000 aircrafts, valued at approximately $600 billion, over the next 20 years. The estimate may be conservative, especially if China can grow its income levels at a much higher pace. Boeing is looking at its new 787 Dreamliner as its big play on wide-body jet travel in spite of current issues.

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Categories:Business/Law
Published by: gloriasimmon on Feb 05, 2013
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02/05/2013

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Why You Should Have Money inAerospace
By
for 
| Feb 4, 2013
The “Boeing 787 Dreamliner” may be grounded for the time being, but the aerospace sector asa whole is delivering some excellent results.We all know how significant the Chinese aerospace market is, given the superlative rise in airtravel and tourism in and out of the country. I expect this to increase going forward.The Boeing Company (NYSE/BA) estimates that China will require 5,000 aircrafts, valued atapproximately $600 billion, over the next 20 years. The estimate may be conservative,especially if China can grow its income levels at a much higher pace. Boeing is looking at itsnew 787 Dreamliner as its big play on wide-body jet travel in spite of current issues.Chief rival Embraer S.A. (NYSE/ERJ) estimates that the global demand will be around 28,000new planes over the next two decades. According to Embraer, there will be over 32,550 planesin the sky by 2031, up from the current 15,500; the company also estimates that the Asia-Pacific region will account for 35% of all plane purchases. According to Embraer, the majorairlines will operate in the U.S., China, intra-Western Europe, and India; and China will be theworld’s largest domestic plane market in 20 years.The findings by Embraer are not a surprise, as they will be driven by higher averagedisposable incomes in the emerging global markets and by the more popular desire for travel.My feeling is that strong wealth generation in the world’s largest emerging markets, includingChina and India, will help to drive the demand for commercial and defense planes along withstocks in theequities market.Air traffic in China is growing at approximately three-times the rate of air traffic in NorthAmerica, so the Chinese aviation market is significant. China recognizes this, and it isdeveloping its own commercial aviation program that will see the manufacturing of airplaneswith a seating capacity of more than 150 passengers. There are no concerns at this time, asthis is still decades away.For investors, I view aerospace as a buying opportunity in the equities market.Just take a look at the SPDR S&P Aerospace & Defense (NYSEArca/XAR) exchange-traded fund(ETF), which is hovering at its highest level in a year, recently breaking through resistance asshown by the horizontal blue line on the chart below.
 
Chart courtesy of www.StockCharts.com
So what companies should you look to buy?In the big plane equities market, I like Boeing and Embraer. In the sub-120 seat market, akey player is Canada-based Bombardier Inc. (TSX/BBD-B), which is also the world’s largesttrain manufacturer.And while I like Boeing in the large-cap stocks equities market, I also like some of the smalleraerospace parts and retrofit companies in the equities market.BE Aerospace, Inc. (NASDAQ/BEAV) has been an excellent growth story over the past decadeand a good mid-cap aviation play in the equities market. The company makes products for theinterior cabins of planes for both the new and retrofit markets.

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