Northrop Grumman Corporation (NYSE:NOC) is one of the nation’s leading defense contractors. And as you may have learned, since the U.S. Congress sequestered (i.e., slashed budgets) spending on defense in 2013, it has had some significant effects. The first, regarding the defense sector, is that NOC stock, among other companies, fell.
The broad market averages were chugging along and there was little interest in getting involved in the defense sector as we brought troops home from wars in Iraq and Afghanistan.
Fewer troops meant less spending on equipment to keep them fed, housed, healthy and safe. Less demand meant less revenue. The stocks sank.
And we have remained in these horse latitudes in the defense sector since.
But times are changing.
Now, in this presidential election year, we have two candidates that are very pro-military and both are trying to out-compete the other for how much they want a bigger, stronger and smarter military. That means, the defense sector will be hauled out of its sequestration slumber and thrown into a massive arms buildup.
Part of this is also out of simple necessity, not just political posturing. You see, we beat up, blew up and fired a lot of the aging equipment we had in the arsenal. Remember, Iraq alone lasted longer than most of the other conflicts the U.S. has been in; and the War in Afghanistan is still ongoing. You go through a lot of equipment regardless of the intensity of the conflict. You always have to be prepared.
That means the U.S. is about to go on a massive spending plan to restock our military arsenal. And much of the equipment will be brand spanking new, not just re-orders.
The U.S. Navy has been transitioning its strategies to take into account the needs of a modern navy. Each branch has been doing similar upgrading.
Bottom Line On NOC Stock
We are at the beginning of a massive megatrend in defense spending. And NOC is in perfect position to benefit. It recently won the new long-range bomber that will replace the B-2. The new B-21 Raider is a $550 million plane (that price is likely to increase) and the Pentagon has ordered a minimum of 100, but more likely 2 to 3 times that number.
Also, Northrop Grumman has a strong position in unmanned vehicles, specifically for the navy. It has unmanned mine hunting boats and unmanned helicopters as well as offensive and defensive drones. This kind of advanced technology also means NOC is an important player in C4ISR work. That is military speak for crucial Command, Control, Computing, Communications, Intelligence, Surveillance and Reconnaissance. This involves the networked battlefield, cybersecurity and projection of force without committing troops. It is the core of the new military and Northrop Grumman is one of the top players.
NOC stock has followed the market up this year, but the big growth will come as we elect a new president and a new federal budget is put on the table in January 2017. Now is the time to buy Northrop Grumman at a great price.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.