You know, I was getting real worried about the aerospace bull market, the one that has to do with strong underlying demand for new aircraft because of increased travel, when Alcoa (AA) talked about the possible lumpiness in the industry.
If you remember back to when Alcoa reported, which now seems like a lifetime ago, you heard a story that there could be some glitches in the short-term growth rate based on some inventory and delivery issues.
When you hear that in this market, it means you freak out because one of the most reliable themes out there has been the great surge in worldwide travel, especially from Asia and the middle-classification of China.
You can't blame anyone for being nervous. The airline companies subsequently reported a bunch of punk numbers with only Southwest (LUV) putting up anything related to respectability, with perhaps Delta (DAL) coming in a not-so-close second. After all, given that these are the companies that are the real customers, you had to think there was more to it than a temporary slowdown.
However, all of that has changed in the last week. First, General Electric (GE) gave you a quarter to die for when it came to aerospace, and it is a dominant player in that business. I can't believe how strong its orders were. That stock's a screaming buy even if they go and purchase National Oilwell Varco (NOV), the big drilling machinery company that Morgan Stanley went from Sell to Buy on today.
Then Honeywell (HON) gave you numbers that showed a surge in orders for everything it sells, including cockpits, and cited the increased flying hours in China. That was a fantastic conference call backed up by a big buyback announcement soon after.
Then yesterday, Lockheed Martin (LMT) reported and its aerospace business blew me away. Sure, a lot of it is military, but that counts as much as anything else in the bull-market thesis that I am peddling. That stock won't quit and it shouldn't because it and Northrop Grumman (NOC), which reported a solid number today, tell a story of increased worldwide defense spending that includes aerospace for certain. (General Electric and Lockheed Martin are part of TheStreet's Action Alerts PLUS portfolio.)
Today we have heard from two others that matter more than perhaps any of these others: Boeing (BA) and United Technologies (UTX). While there was some sloppiness to the actual reported earnings per share, Boeing reiterated that its order book is brimming and multiyear in nature. Solid, solid, solid.
United Technologies may have had some divisions that were weaker, but aerospace was on fire with its Pratt & Whitney engines, and I think it is only going to get stronger with a brand new engine coming.
Which brings me full circle back to Alcoa, which created the doubt. That stock, which you know I think is terrific, has gone from $9.25, which it fell to when it issued its initial remarks, all the way to $11, helped immeasurably by a rise in the price of the actual raw metal and the company's coming split into commodity aluminum and highly engineered metals.
My advice: This cycle's so long and deep that I don't even know if airlines can afford to leave the long, long queue to get new airplanes. Buy these stocks on weakness, although that's been something we haven't seen since Alcoa stalled the group out literally almost a month ago.