Howmet Aerospace Inc. (HWM): A Bull Case Theory

Company Overview - Howmet Aerospace Inc. provides advanced engineered solutions for the aerospace and transportation industries, positioned as a mission-critical supplier in global aerospace and industrial infrastructure [2] - The company specializes in highly engineered components, such as turbine blades that operate at extreme temperatures, often serving as a sole-source supplier for many aerospace programs [2] Competitive Advantage - Howmet has established a durable moat through proprietary materials science, deep customer integration, and long qualification cycles, making replacement costly and impractical [3] - The company benefits from long-term secular demand in both commercial and defense aviation, rather than being affected by short-term cycles [3] Market Dynamics - A significant near-to-medium-term tailwind is the aerospace aftermarket, driven by production delays at aircraft manufacturers, leading to increased demand for engine spares and replacement parts [4] - This aftermarket exposure is attractive due to its high margins and recurring nature, where Howmet has shown consistent execution strength [4] - Additionally, the company is experiencing accelerating demand in its industrial gas turbine business, fueled by the growing power needs of AI-driven data centers, providing a second structural growth vector [4] Financial Performance - Howmet has positioned itself as a reliable "beat and raise" compounder, consistently lifting guidance through 2025 and targeting approximately $9 billion in revenue by 2026 [5] - Despite a strong stock performance, this strength has created opportunities in the options market rather than a reason to step aside [5] Investment Strategy - Selling February 2026 $190 puts allows investors to generate income while maintaining a margin of safety relative to current prices and key technical levels [6] - This strategy enables investors to capture premium if shares remain elevated or to acquire a high-quality asset at a discounted price if volatility leads to a pullback [6] - This reflects disciplined capital allocation, allowing investors to be compensated while anchoring exposure to a crucial component of the aerospace recovery [7]