Aerospace Defense Growth Stocks: General Dynamics and Curtiss-Wright

On January 29, The Wall Street Transcript interviewed Decatur Capital Management's Degas A. Wright on investing in large and small-cap growth stocks. Key excerpts with his stock picks follow:

TWST: What sectors are you overweight in at this time?

Mr. Wright: We're seeing strength in finance, aerospace and utilities. We are a growth strategy; however, we look at all of the sectors and really focus on where the returns are coming from. Right now, we are seeing strength in those areas.

TWST: What type of aerospace companies have you been looking at? Are they on the defense side or on the commercial side?

Mr. Wright: On the defense side in the large cap strategy, we own General Dynamics (GD). General Dynamics is one of the leading global military contractors and leading global manufacturers of corporate jets. We are looking for sales increases of about 11% in 2007, driven primarily by their Combat Systems and Aerospace segments. The military's increasing emphasis on networking and electronics, a strong demand for land combat vehicles and changes in the naval fleet are trends that, due to global unrest, will be long-term drivers for General Dynamics products. Based on our Decatur Rank Model, we believe that General Dynamics is undervalued and is early in its positive momentum cycle. Therefore, we feel that General Dynamics has significant upward price potential.

In the small cap strategy, we own the aerospace firm Curtiss-Wright Corporation (CW). Curtiss-Wright manufactures flow control and motion control for various military and commercial uses. Curtiss-Wright derives 50% of its sales from the military sector. We see additional sales growth based on the military continuing transformation initiatives. These transformation initiatives are providing funding for advance technologies to support new and enhanced military platforms, and Curtiss-Wright will continue to benefit from these initiatives. Going forward, we believe that Curtiss-Wright is slightly undervalued. The market sentiment on the stock is positive and we are forecasting additional price momentum. Therefore, based on our outlook for Curtiss-Wright, we believe that it has upward price potential.