Sector Panic Selling Creates Opportunity to Go Long HEICO Corp.

Jun.11.08 | About: HEICO Corporation (HEI)

In Friday’s market bloodbath, jet engine and aircraft component replacement parts maker Heico Corp. (NYSE:HEI) dropped -18.58%, closing at $40.13. After-hours trading smoothed out the drop up to $41.22.

Apart from heedless sector panic, there’s not a whole lot to explain this drop at this point. HEI is one of those rare birds that has been consistently beating earning estimates, quarter after quarter. Q1 profits, reported on May 30, rose a substantial 27% to $11.9 million, or $0.44 per share, versus $9.4 million, or $0.35 per share.

Quarterly revenue increased to $144 million from $121.2 million a year ago. Heico Corp. recently also expanded a credit line to $300 million from $130 million, part of which can be borrowed in euros.

This is not a bad company by a long shot. It is now close to its 52-week low of $38.87. (Its 52-week high, posted on Dec. 26. 2007 , is $56.92.) Further nervous-nellie selling might push the stock price near its 52-week low... translating into a probable downside of about 5%.

But I think last Friday’s selling has created a good opportunity to buy this stock, with an upside of about 15-20% from current levels.

Recommended Exit price: $38 on the downside, $48 on the upside.