Stock Entry Point Article​

HEICO Corporation (HEI) 2

The aviation industry has taken a beating over the last few months. With airlines grounded or flying a fraction of their fleets, maintenance service and spare parts providers are also feeling the negative impact of the reduced flying. Among these ancillary businesses are some of the best aerospace and defense stocks.

Heico Corporation earns close to half its revenues from the commercial aviation sector. It provides spare parts, repair, and overhaul services to commercial airlines. The stock fell by more than 50% during the March market crash. However, since then, it has gained close to 63%. And with lockdowns now easing, commercial airlines are poised to make a gradual comeback.

What works well in favor of Heico is the fact that when airlines do recover, they may begin running jets that are already under them rather than purchase new ones. The older jets will need replacement parts and aftermarket sales of such parts make up 54% of Heico’s flight support segment revenues. Besides, as pointed out above, about half of the company’s revenues come from non-commercial sectors. It does significant business in defense. Heico also supplies parts that are used in medical devices like ventilators, x-ray systems, and sterilization equipment. It also has some business in the space and electronics sectors. This diversification and positioning of Heico make it one of the top choices for aerospace and defense stocks to buy now.

The TransDigm Group is another stock that could prove to be one of the top aerospace and defense industry stocks. It does significant aftermarket sales which can potentially be aided by airlines leaning heavily on existing jets rather than buying new ones.

Lockheed Martin is also one of the best defensive stocks 2020 as far as the stock performance is concerned. It has gained 39% since the March market crash and is down only 3.44% since the beginning of the year.


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