Defense Stock #2 – Lockheed Martin Corporation (LMT)
Targeted bombing does a fantastic job of rooting out the bad guy, but for the military complex, carpet bombing is the preferred way to go. I think
you know why.
Lockheed Martin (LMT) makes the planes and missile systems that cater to both approaches. But one makes
more money than the other. It is clear what direction Obama would prefer. He favors technology over brute strength. Unfortunately for Lockheed Martin,
brute strength generates brute profits. We will be making fewer planes for manned missions in the future in favor of more drones. The first iteration
of a defense budget under this administration cancels a plan for new marine one helicopters and halts new purchases of F-22 fighter jets.
The net effect will likely be negative for Lockheed Martin. Shares may trade for a low multiple of earnings today, but earnings will be less under
Obama from here. I can see a 10%-20% reduction in defense spending. If so, LMT could see a drop in valuation of 30%-50% from current levels. I would
- Poll of the Day