Excited yet?

The DOW almost hit 11,300 - and that's great to see. I mentioned last week that the DOW wants to cross 11,300 and it looks like it is going up after a brief retreat. Was that a last test, a shaking out of any nervous investors before surging to 11,400? I am playing it that way.

I do recognize that there will be dips and retreats along the way, but the trend is up (for now).

Some fun stuff happened recently.

GILD - Beat earnings expectations. This was obvious - they have the best HIV drug on the market. I also thought Tamiflu sales would be higher. I wonder how much the market will boost the stock price. If they continue with a 35 P/E, then GILD is worth $66. I don't like the slowdown in sequential quarter-to-quarter growth, but that tends to be the seasonal impact (post flu season that is).

STX - Beat earnings but not good enough. Sales were up 16% and earnings were up 19.6%. I like that earnings still grew faster than sales. I bet margins ticked up a bit as well (haven't seen the actual details). But they pushed growth out into the 2nd Half. Watch for folks to get bored and walk away.

MRVL - Ok, now I am concerned about them because of STX results. They are very STX dependent. But the positives from TXN should make things all right in the sense that chip companies should look good. MRVL was up based on TXN results.

MOT - Ooops. Sales up and profit down. Not good. Margins down from 33% to 30%. Only the handsets are keeping them whole. They need to sell off the network business. But then what? They spun off semiconductors right when that business took off. They make...handsets and have a confused set of other businesses. Nokia is ready to destroy them, and Samsung is too.

TXN - Hello! This is the way it should be. Sales up 23%, earnings up 50% (and higher if you exclude the compensation expensing). TI is enjoying the cell phone rally as much as MOT is.

TIE is shooting for the stars. Will China announce more planes? Probably. Why is this happening? Unlike other metals, titanium is also an oil price play. Did you know that American Airlines spends ~$21M+ on fuel EVERY DAY? Fuel was 23% of operating costs last year. Fuel efficiency is critical and titanium is a guaranteed way to get there via weight reduction.

The initial mass of the plane affects how much fuel burn is needed to produce an increase in percent mass change. A greater amount of fuel burn per hour is required to increase the percent mass change for more massive planes than for less massive planes.

The math gets complicated – fuel gets burned off, plane gets lighter, less fuel needed, etc. Basically, a 3 hour 747 flight uses 30K gallons of fuel. Using more titanium in the engines, frame and over the composite materials will yield 10% savings in consumption.

That’s about $6K per flight (assuming $2 per gallon for jet fuel).
American Airlines operates 3600 flights a day. That’s a potential savings of $21M PER DAY in fuel costs.

The 787 and Airbus planes use 36+ tons of titanium today. 15% of the 787’s frame is titanium. There are ~500 firm orders for planes today, and growing. That is more than world titanium supply today. What happens if/when they increase demand for either new planes or for more titanium in each plane.

Titanium is now 100x the price of steel ($25K per ton). But it is also 56% the weight of steel. So the cost factor is only 56x. So if they want to double titanium content to an extra 36 tons per plane, that is incremental ~$1M in materials cost. But the fuel savings is recovered within one year (and probably much, much sooner).