Ken Nagy, CFA
Looking Beyond the Obvious Benefactors from the China Deal
When news that the US had signed a $45bn export deal with China, amid an official state visit by China’s President Hu Jintao, to the United States the market responded to the handful of key American companies that would be affected. Take Boeing for example. The trade deal includes a $19bn purchase of 200 Boeing aircraft.
Perhaps we should look beyond the obvious benefactors to unearth some rare opportunities.
Trans-Pacific Aerospace Company (TPAC) intends to monetize its proprietary technology. TPAC and its joint venture partners intend to manufacture aerospace quality standard spherical bearings, rod ends and bushings (bearings) in China. Growth in China is two-fold: First the number of planes in China is expected to jump from 1,256 today to 4,330 over the next 20 years. With 3,000 spherical bearings on each plane the market is substantial. Second the offsets or obligations that original equipment manufacturers (OEMs) such as Boeing and Airbus owe China are approximately $16 billion. There are currently no manufacturers of spherical bearings in China. We see value in the shares.
For a copy of the full research report, please email scr@zacks.com with TPAC as the subject.
