Buzzing The Tower: Mid-July Review

By Chris D. Olin Published on July 20, 2021 at 5:45 AM

Tower… Requesting permission to release Buzzing The Tower… Yikes! Trading days like yesterday are the reason Jester decided to retire early and begin his new career as a bounty hunter and the eventual antagonist to Douglass Quaid while he was on a Mars vacation. But we digress… Investors seem to be reacting to heightened concerns about an economic slowdown, trade tensions, and COVID-19 outbreaks, but we see opportunity. Given the renewed upstream aero channel strength, identification of potential catalysts, and survey data points, we would be inclined to start positions at these lower price points, focusing on companies tied to jet engine market, premium alloys, or stainless steel production (areas of survey strength). The top-of-mind names include General Electric (GE), Carpenter Tech (CRS) and Haynes International (HAYN). Normally, we would blame an intern for another late release of the bi-monthly review, but this one is on Quato. The little guy insisted on jumping in one of our backpacks so he could wait in-line with us for Top Gun 2 movie tickets Continue reading

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Specialty Materials: Highlights From Quarterly Channel Checks

By Chris D. Olin Published on July 16, 2021 at 5:06 AM

Despite recent negative headlines regarding a disruption in 787 aircraft production, we are sticking with a bullish thesis on the specialty materials group following a review of better-than-expected quarterly survey results. Communications with industry contacts confirmed much stronger demand/pricing trends in 2Q21, improving channel sentiment and upward forecast revisions, approaching catalysts, and more manageable inventory situations. Key data points collected over the past few months suggest there is an upward bias to consensus forecasts (looking out 3-4 quarters), with emphasis placed on companies levered to jet engine OEM demand and the premium alloy product categories (nickel-based alloys, cobalt-alloys, and specialty stainless steel). Continue reading

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Carpenter Technology (CRS): Initiating Coverage With A Strong Buy; This Is Our New Top Pick

By Chris D. Olin Published on July 6, 2021 at 11:47 AM

We are initiating coverage on Carpenter Technology (CRS) with a Strong Buy investment rating and $50/share target price. Following a short period of trading weakness, we are comfortable with the lower entry point. The shares look undervalued today, especially after the consideration of better-than-expected survey results and backdrop of macroeconomic strength, rebounding channel sentiment, commodity nickel price inflation and enhanced commercial aero demand visibility. Market intelligence suggests the specialty materials group is at or near a summer inflection point which should be followed by a multi-year period of above-average top-line growth. Continue reading

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