A recent arrest in South Carolina didn’t make national headlines.

At first blush, this makes sense. After all, the arrest simply involved two men charged with selling counterfeit goods in a small town most Americans haven’t heard of.

The thing is, this wasn’t an isolated incident. Last month, for example, police in New York busted a crew selling fake upscale goods with a retail value of ten million dollars.

It’s no wonder experts at North Carolina State University estimate that counterfeit goods cost the global economy three trillion dollars.

But here in America, fake goods can even jeopardize national security. This threat is why the U.S. Pentagon is increasing surveillance of the country’s massive supply-chain system…

And it’s also why I’m writing you today with a potential profit opportunity.

The True Cost of Counterfeit Goods

When it comes to counterfeit goods, sometimes the costs can’t be measured in dollars.

For example, recently, an Air Force pilot went to activate his ejector seat in a brand-new F-35 aircraft, and the seat’s parachute didn’t deploy. The investigation into the incident found as many as ten counterfeit parts in the seat, including transistors and semiconductors from unverified sub-subcontractors.

This sad story demonstrates why a redoubled effort to identify counterfeit parts, and get their suppliers out of the Pentagon’s supply chain, is underway.

Because when you’re selling military equipment, there’s little tolerance for cheap parts. As one military supply-chain manager noted, Apple doesn’t guarantee its iPhones for ten years, yet F-35s need to operate for decades.

Often, the problem doesn’t lie with the equipment’s prime contractor. For example, defense company Lockheed Martin (NYSE: LMT) makes the F-35 and other major defense systems. But production of just one plane involves 1,700 suppliers delivering more than 300,000 parts. The Air Force’s network of providers is more than 12,000 strong.

In one instance, Lockheed subcontracted a part to a Scottish firm that then subcontracted to a Chinese firm — and Lockheed had no idea!

That’s why the need for a company like Curtiss-Wright (NYSE: CW) is so pressing…

Introducing Curtiss-Wright

If the name of this aerospace company seems familiar, that’s because it includes the surnames of three of the most famous people in the history of aviation and aeronautics: the Wright Brothers and Glenn Curtiss, the father of naval aviation.

Curtiss-Wright left its engineering and plane-design business long ago, and now focuses solely on making high-quality precision parts and equipment. Its products are all tops in their respective markets. Those markets include:

• Defense — covering air, land, and sea.
• Commercial Aerospace — this company makes nearly every flight recorder — known as a “black box” — used on airplanes, as well as relay systems and pumps.
• Energy — it’s been making nuclear-energy equipment for more than fifty years.
• Industrial — this company has its hands in sectors like mining and construction.

Notably, each of these markets is primed for significant growth in the years ahead.

An Advantageous Position

The Pentagon is so concerned about counterfeit parts for a few reasons. And each one explains why Curtiss-Wright is in such an advantageous position:

First, as the F-35 story pointed out, there’s an issue with product reliability. Military equipment is expensive, and needs to last, even under extreme conditions.

Second, corporate espionage is at play. Chinese “shadow” subcontractors learn how parts are built, and even add special devices to listen to these parts in use. This enables them to essentially steal U.S. time and money devoted to Research & Development.

Finally, there’s national security. If U.S.-China relations continue to cool, and China decides to stop producing parts, U.S. and allied defense systems could be compromised.

These factors are why Congress has approved an eight-percent increase for the 2023 defense budget, which already sits at more than $800 billion. They’re also why interest has grown in keeping much of the money spent on parts and equipment made by verified subcontractors right here at home.

Furthermore, one billion dollars in the defense budget is earmarked for replenishing America’s strategic metals reserve, so the U.S. can rely less on countries outside of its sphere of influence. Curtiss-Wright has a leg up here, too, as it’s already a key defense supplier.

A Bright Spot in a Weak Market

The new generation of nuclear power is drawing significant attention from the military, even public-utility companies and private companies. Curtiss-Wright has half a century of experience delivering precision parts and equipment to civilian and military customers.

For example, the company supports U.S. Navy nuclear-powered craft, and is likely to play a key role in the U.S. Army’s upcoming Project Pele. (The objective here is to build a deployable nuclear-power reactor for the Armed Forces.)

Involvement like this is why Curtiss-Wright has been a bright spot in an otherwise weak market. The S&P 500 is on track to close the year down more than seventeen percent. Curtiss-Wright, meanwhile, could end 2022 with gains of more than seventeen percent.

Adding this company to your portfolio enables you to potentially capture even more upside as we head into 2023.

Meanwhile, in our “Trade of the Day,” I’ll reveal another defense-related investment that’s outperforming the market.

In fact, its shares are up twenty percent in just the past three months. To learn more, check out our “Trade of the Day.”

Cheers and Good Investing,

Chief Investment Officer
Trend Trader Daily

Tags: aviation counterfeit-goods