|Written by GSCR Staff|
|Tuesday, 27 August 2013 08:23|
In Monday’s Goldman Guide we mentioned possibly looking at defense stocks as a short-term play related to the ongoing turmoil in the Middle East. While “Troubles in The Middle East” is almost a cliché headline there are a couple of reasons to believe that the U.S. may get involved.
First, as mentioned in the Guide, the use of chemical weapons against dissidents by the Syrian government may force our hand. Second, Egypt is a critical nation in the region, boasting a population of 86 million, and from a very critical business perspective, home of the Suez Canal.
The defense stock CPI Aerostructures, Inc. (NYSE – CVU - $11.40) appears to be an outstanding play here as an up and comer with nice momentum. CVU is up nearly 40% since the middle of April.
First, the Company’s products and services are right in line with the probable course of action the U.S. will take, an air strike. CPI Aerostructures produces structural aircraft parts for defense contractors, including the USAF (United States Air Force) and also operates as a subcontractor to major aircraft manufacturers on the commercial level. The Company makes modular and structural assemblies, skin panels, leading edges, flight control surfaces, engine components, wings, wing spars, cowl doors, and nacelle and inlet assemblies for military customers.
On the valuation side, CVU appears to be undervalued based on future EPS estimates. The 2013 EPS Street consensus is forecast at $0.86 with and 2014 estimates at $1.25, placing the forward P/E around 9. On the technical, side the short term DMA is very bullish at both the 5 and 20 day range.
CVU is a great way to possibly take a short-term profit on a geopolitical long-term problem.
Have a great day.
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours. Goldman Small Cap esearch is not affiliate in any way with Goldman Sachs & Co.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com