(FORTUNE Magazine) – When raider T. Boone Pickens buys, Wall Street follows. In late July Boeing disclosed that Pickens's Mesa Limited Partnership had acquired a small stake in the company and was seeking government permission to boost it to 15%. The stock immediately gained $7 a share in altitude, to $53.75. Eleven days later Pickens revealed that Mesa held 4.4% of Singer and might buy more of the aerospace and consumer products concern. That stock also jumped. The wily Texan's sudden hunger for defense and aerospace stocks has prompted many investors to look afresh at the group. The sector has dismally trailed the market since late 1985. Major aerospace issues today trade on average at about 13 times estimated 1987 earnings, far below the market. ''The stocks may look cheap to many people, but they should be cheap,'' argues security analyst Gary Reich of E.F. Hutton. Pentagon spending, which accounts for 70% of industry revenues, is peaking. According to Alan Benasuli of Drexel Burnham Lambert, military expenditures will begin to decline late this year or early next year at about a 10% annual clip through 1991 at least. Moreover, new Pentagon policies are narrowing contractors' profit margins. But some analysts believe aerospace stocks fully reflect these negatives already, and that the shares of some companies with good growth potential are unduly depressed. David Smith at Baltimore's Alex. Brown & Sons is keen on Northrop, prime contractor for the Stealth bomber. Unexpected costs in the politically sensitive program have depressed Northrop's earnings in recent quarters, but Smith contends that the write-downs are over and that when production begins soon, fat profit margins should keep the company's earnings climbing at a smart 20% pace into the 1990s. At Shearson Lehman Brothers, analyst Michael Gardner lauds United Technologies as a company whose recent troubles mask fundamental strength. Big losses last year at two subsidiaries have hurt earnings badly, but Gardner believes the worst is over. Such other subsidiaries as jet engine maker Pratt & Whitney, Otis elevators, and Carrier air conditioning are leaders in their fields and poised to rake in profits. ''The stock won't knock your socks off,'' Gardner says, ''but should nicely outperform the market by 15% over the next six to 12 months.'' Several analysts make the case for Boeing as an undervalued stock. The company's business is two-thirds commercial, and earnings could begin to spurt in late 1988 from sales of a new, more efficient version of the jumbo 747. Paul Nisbet of Prudential-Bache expects Boeing's stock to trade in the $80-to- $85-a-share range within 18 months. Almost no one on the Street believes Pickens could take over Boeing; he may be more intrigued by Newmont Mining, a gold, coal, oil, and gas concern akin to the raider's past targets. In mid- August, Pickens-led Ivanhoe Partners bought nearly 10% of Newmont. Investors skeptical about earnings prospects may want to consider likely takeover targets. More than 30 aerospace mergers and acquisitions have taken place in the past three years, and the consolidation will continue as the defense budget tightens. Big military contractors, flush with cash from a decade of expansion, are especially eager to scoop up smaller companies with expertise in defense electronics, the one area where the Pentagon is certain to increase spending in the years ahead. Singer has such expertise. Last year it sold or spun off most of its nonaerospace businesses, including sewing machines. Investors were already paying a takeover premium for Singer before Pickens piqued interest in the company. Most analysts calculate Singer's takeover or breakup value at around $70 a share. A hostile takeover may be harder to pull off now that Singer has spirited its top brass to a new headquarters in New Jersey, which has a tough new anti-takeover law modeled on Indiana's. But a friendly deal is always possible. Another takeover prospect is Tracor, an Austin, Texas, electronics outfit with prowess in antisubmarine warfare, one of the hottest specialties going. Benasuli of Drexel Burnham expects the stock, still undervalued in his opinion, to climb 15% in the next 12 months.

CHART: COMPANY REVENUES NET STOCK PRICE RECENT latest four INCOME RANGE PRICE quarters in millions last 12 months P/E multiple * in millions

United Technologies $16,472 $134 $39.50-$60.50 $57.50 17.7

Boeing $16,028 $583 $42.75-$62.25 $52.00 13.9

Northrop $5,749 $4 $36.875-$52.625 $48.75 N.A.

Singer $1,801 $44 $37.25-$54.25 $50.75 28.8

Tracor $651 $19 $16.50-$24.375 $24.25 ) 25.7

*Multiple based on earnings for the latest four quarters, exclusive of nonrecurring items.

CREDIT: NO CREDIT CAPTION: Aerospace Stocks With Climbing Power Compared with the whole market, the stocks of most defense contractors are cheaper than in years. That may have drawn Boone Pickens to Boeing and Singer, which makes the flight simulator shown.

DESCRIPTION: See above. Color photograph: Flight-simulator cockpit and crew.