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Looking for a more low-risk take on market for the next generation of airplanes than Boeing (BA) itself? (Boeing was a Jubak’s Picks on September 30, 2010. For my most recent update on that stock see my January 26 post )

May I suggest Precision Castparts (PCP), the low-cost supplier of cast and forged metal parts to Boeing and jet engine makers General Electric, Pratt & Whitney (a division of United Technologies) and Rolls Royce.

The company makes precision castings (34% of 2010 sales), forged products (42% of sales) and fastener systems (25% of sales) primarily for the aerospace and power generation markets. Since the parts that it makes are critical in these applications, the company’s customers aren’t eager to shop around for new, untested suppliers. General Electric has been a customer for four decades, according to Standard & Poor’s.

It helps too that Precision Castparts is extremely tight with a buck. The company was been able to increase operating margins in each quarter of fiscal 2010 despite falling volumes. That kind of cost structure gives Precision Castparts a lot of flexibility to make sure that no competitor steals market share by offering lower prices. And that flexibility, in turn, has let Precision Castparts gradually work its way to a No. 1 slot in most of its markets. For example, the 2006 acquisition of Special Metals turned Precision Castparts into the world’s largest producer of high-performance, nickel-based alloys and super-alloys. A series of smaller acquisitions has made Precision Castparts the market share leader in forged products leader replacing Alcoa’s Howmet unit.

Operating margins, which dipped as low as 18.2% in the third quarter of 2007 will come in at 25% in fiscal 2011 (the company’s fiscal year ends in March) and then climb to 26.8% in fiscal 2012, according to S&P. That should push earnings per share to $7.10 in fiscal 2011 and to $8.50 in fiscal 2012. At a recent price of $142 a share that puts the projected fiscal 2011 price-to-earnings ratio at 20 and at 16.7 for fiscal 2012. Wall Street analysts project earnings per share growth of 20.7% for fiscal 2012.

This rich part of the cycle should go on for a while for Precision Castparts. Boeing has a total order book of 3,443 commercial aircraft, the company said earlier this month. Orders for the new 787 Dreamliner are holding above 800 despite delays in delivering the first plane to customers. Precision Castparts estimates revenue of $5.6 million a plane on the 787. That adds up to a lot of revenue for company that showed a total $1.6 billion in revenue for its most recent quarter. (Revenue grew by 16.5% from the year earlier quarter.)

I think the current price of a little above $144 is a decent entry price. As of February 1 I’m adding this stock to Jubak’s Picks. My target price for December 2011 is $170 a share.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Boeing but did not own shares of Precision Castparts as of the end of December. For a full list of the stocks in the fund as of the end of December see the fund’s portfolio at