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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Boeing Still Climbing, Lifting Other Northwest Companies Airline Orders Don’t Look Like Frenzy That Preceded Past Market Collapses

Boeing Co. stock has not peaked, and the shares of suppliers and other Northwest companies should still gain altitude, the manager of a regional mutual fund said Thursday.

David Simpson, of Seattle, who was on a panel of regional stock analysts and money managers at the Pacific Northwest Regional Economic Conference, handles $220 million at the Composite Northwest Fund.

He said large orders placed by airlines in the last year are not yet symptomatic of a “fever” that could break, bringing cancellations, layoffs and tumbling earnings.

But, he cautioned, “No one rings a bell when order rates peak.”

If it is not yet time to sell Boeing stock, the best time to buy may be long past. Simpson said investors should accumulate the stock when earnings are poor, the price is low, and airlines are at the bottom of their periodic cycles.

With a solid company like Boeing, he said, investors may buy too early on a down cycle, but they can count on a rebound at some point.

Simpson said the giant aircraft maker has insulated itself somewhat from order cycles by taking a bigger position in the defense industry.

The shares of two big Boeing suppliers, Precision Castparts and Oregon Metallurgical, behave differently, he said.

While Precision Castparts’ stock tends to track Boeing, Simpson said, Oregon Metallurgical shares are more erratic.

Although aircraft consume the bulk of the metallurgical company’s output - a Boeing 777 is 9 percent titanium - some goes into high-tech golf clubs.

Company officials misread that market, and investors responded by punishing the stock. Once as low as $17 per share, the price has rebounded to $23, and first-quarter earnings were good, Simpson said.

He predicts a rise into the $30 range, based on prospects for higher titanium prices.

The last stocks to participate in what Simpson called “the Boeing cycle” are retailers, banks and real estate concerns that feed off the cash the company pumps into the Northwest economy.

He suggested Fred Meyer, with the death of competitor Ernst, will do well because its stores are well located.

Another retailer with potential, is Nordstrom, said panelist Lisa Sroufe of Ragan McKenzie in Seattle.

She said Nordstrom stock, at $37, trades below the price 10 years ago. With the economic resurgence in California, where the luxury chain has 38 percent of its square footage, results should improve, she said.

But Sroufe said other retailers that are concentrated in the region could suffer as its prosperity attracts national chains that will intensify competition.

Also a specialist in utilities, Sroufe said Washington Water Power Co. prospects look bright as deregulation opens markets for its inexpensive power and energy services.

“WWP is a pretty good value,” she said.

California utilities, like retailers, should get a boost from a healthier economy in that state, she added.

Panelist Ken Roberts, who runs his own Spokane-based advisory firm, said banks represent a good way to invest in the Northwest economy because loan demand and asset quality improve in a thriving financial environment.

But, Roberts added, investors have bid most banks stocks so high they are no longer good values, and Washington Mutual Bank remains his only substantial position.

Roberts suggested another way to play growth in the area is to buy BMC West, a building supply wholesaler.

“These guys sell lots of stuff,” he said, and should sell more as home building and expansion continues, and BMC buys more outlets.

The stock trades at about 10 times earnings, Roberts said.

, DataTimes