Trade of the Day: Orbital ATK (OA)

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The Paris attacks remain in the forefronts of our minds and, as we struggle to make sense of the cowardly slaughter as human beings, it’s also natural to think about it through the eyes of an investor.

Generally, we have seen that such atrocities weigh on the public conscience more than on stock prices. After the 9/11 attacks in the United States, for instance, stocks went down for a week but then rallied the next three months, as shown below.

Even that initial decline was more about the loss of infrastructure and the week that the market was closed than it was about just plain selling.

With the Paris attacks considered the worst violence seen in France since World War II, France retaliated with airstrikes against ISIS targets in Syria. The airstrikes hit a command center, arms depot and training camp around Raqqa, Syria. France has also called for the United States and Russia to join it in a global coalition to destroy ISIS.

Defense contractors’ shares always go up at times like these, for obvious reasons. You can bet that politicians and lobbyists will declare that governments need to spend more on military goods to defeat this persistent enemy.

Lockheed Martin (LMT) jumped 6%, Northrop Grumman (NOC) rose 5.5%, General Dynamics (GD) rose about 3% and Raytheon (RTN), which specializes in missiles, zoomed almost 7% to a new all-time high.

There’s another idea I’d like you to consider in the midst of the Paris attacks.

Orbital ATK (OA) is a smallish defense contractor that was formed a couple of years ago by the merger of space systems maker Orbital and military ammunition maker Alliant Techsystems. The merger was announced last April and completed this February.

Shares blasted higher after the merger took effect, and then flat-lined for seven months.

The stock rocketed again in the wake of the Paris attacks because the Alliant part of the company produces military ammunition; small-caliber commercial ammunition; precision weapons and munitions; high-performance gun systems; propellant and energetic materials; propulsion systems for tactical missiles and missile defense applications; strike weapons; aircraft survivability systems; fuses and warheads; special mission aircraft; airborne missile warning systems; defense electronics; and advanced anti-radiation guided missile and multi-stage supersonic target products. Yeah, a mouthful — but you get the picture.

A new commitment to rout ISIS will require a lot more missiles and other such weaponry, and you can bet there will be a lot of rhetoric from the presidential campaign trail to do even more. Despite the recent run-up, these kinds of moves typically tend to last at least a couple of weeks. So, let’s give it a shot, so to speak.

Buy OA common at current levels, ideally below $85.50.

I have an initial target for OA shares at $90.20 limit, good till canceled.   Set a stop at $79.50, good after 10:30 a.m. ET only.

Also, if you took the Xerox (XRX) trade with me earlier in the month, the shares came close enough to the $10.40 target I gave you, so I recommend taking profits here for a gain of 5% to 6% depending on your entry. Copy that!

Jon Markman writes a daily trading newsletter, Trader’s Advantage, and CounterPoint Options, a service geared towards helping individual traders make steady, consistent profits with the VIX. Follow him on Twitter for his latest take on markets and innovation.


Article printed from InvestorPlace Media, https://investorplace.com/2015/11/orbital-atk-oa-paris-attacks/.

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