3 Defense Stock Winners in the 2016 Budget

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While there’s no guarantee that President Obama’s budget will get through Congress as it stands now, some things are pretty clear. One is, Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC) and Raytheon Company (NYSE:RTN) are looking good. You can read more about which stocks look best in my Blue Chip Growth investing advisory.

Defense_Stocks_Jets_Airforce_185.jpgMost people on Capitol Hill have a hard time saying ‘no’ to defense (and homeland security) spending, especially when a Democratic president is requesting it.

That would certainly put Republican leaders in the House and Senate in an embarrassing position of being less pro-defense than the Democrats, which isn’t going to happen.

So, let’s break down how all this new money Obama proposes to spend breaks down.

In order, the top winners in Washington are: Department of Transportation (31%), Department of Housing and Urban Development (10%), Department of Homeland Security (9%), Defense Department (8%), Environmental Protection Agency (6%).

Give that Defense and Homeland are massive budgets, their smaller numbers still mean big money.

Transportation’s big increase is actually monies to help build/rebuild U.S. infrastructure. So, it’s more a stimulus package than an expansion of the department’s size.

That fact is, when all is said and done in the world’s largest sausage plant, there will be a lot of wheeling and dealing on the other fronts, but Defense won’t see much happen to its numbers. Stay on top of what to expect from different sectors with my Blue Chip Growth investing advisory.

Given that, and the fact that I’m bullish on the defense sector again given Russia’s shenanigans, ISIS destabilizing the Middle East and China and India’s interests in growing their military reach and power, it’s a good time to explore the big winners in big defense.

Lockheed Martin Corporation (NYSE:LMT)

Lockheed Martin LMTLockheed Martin Corporation (NYSE:LMT) is up 17% in the past six months and is sitting near 52-week highs at this point. The good news has set in.

LMT is the defense sector heavyweight. Lockheed Martin is the chief builder of the Navy’s newest Littoral Combat Ship (LCS) and has just laid the keel on the 13th LCS to be built. Building one of these involves 900 companies in 43 states. The fleet will be 32 ships when completed with LMT building about half of them.

But beyond the boats, it’s the air that is under Lockheed Martin’s wings in this current budget. Obama is asking for an extra $10.7 billion for 57 F-35 fighters. Plus, there’s an extra $208 billion on the table for operations and maintenance, some of which will also see LMT’s bottom line.

Northrop Grumman Corporation (NYSE:NOC)

northropgrummanNorthrop Grumman Corporation (NYSE:NOC) is a play on the modern-battle space. NOC is about the networked battlefield. C5ISR (Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance and Reconnaissance), unmanned vehicles, cyber security. These are Northrop Grumman’s strength.

And the one thing about these sectors is, they cross over from simply being defense sectors. They reach across all aspects of the government, into the intelligence communities and particularly homeland security.

The good news for NOC about all this is, these are the places where there are deep pockets and little oversight (or visibility) on how it is spent.

NOC stock is up almost 34% in the past six months and is trading near 52-week highs. Given this run and the fact that its 87% institutionally held, there’s a good chance the smart money thinks there plenty of headroom left on Northrop Grumman stock.

Raytheon Company (NYSE:RTN)

Raytheon rtn stockRaytheon Company (NYSE:RTN) is more or less a niche players in the big defense game. RTN is a missile maker.

For a military the size of the U.S., that’s like being a bullet maker. These munitions and the systems that launch them are core purchases, and they get used a great deal.

Raytheon also makes the radar systems that help target all those missiles. And RTN clients reach around the world. Most notably, Israel uses the Patriot anti-missle system.

Also, as the U.S. moves its bases out of Japan, Guam is becoming a key strategic outpost, and it’s currently being armed with Raytheon’s THAAD anti-missile defense system.

While RTN doesn’t land the high profile, big project jobs that go to NOC or LMT, Raytheon’s an integral player in almost every offensive and defensive large piece of tactical equipment.

Raytheon lowered guidance in it Q4 earnings report, but that means a surprise to the upside, especially with increased defense spending, will be a boon for smart investors now.

Louis Navellier has seen booms, plunges and meltdowns (and everything in between) over the last 15 years as editor of the popular Blue Chip Growth investing advisory. Since launching Blue Chip Growth in 1998, he has generated returns of 345% versus the S&P’s 96%, beating the market by more than 3 to 1. Using a combination of quantitative and fundamental analysis, Mr. Navellier identifies the high-quality stocks that will give his readers market-beating returns — in all market conditions. His latest analysis has uncovered five stocks that will weather the coming market volatility and rebound strongly, handing investors who get in now double- and triple-digit returns. You can find complete details here in his latest Special Report: 5 Rotation Rally “Return Giants” That Can Crush Volatile Markets. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2015/02/3-defense-stock-winners-in-2016-budget-lmt-noc-rtn-bnk/.

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