There Still Are Boom Times Ahead for Lockheed Martin Corporation Stock

Advertisement

Lockheed Martin stock - There Still Are Boom Times Ahead for Lockheed Martin Corporation Stock

Source: Praveer Sharma via Flickr

There was great news for Lockheed Martin Corporation (NYSE:LMT) when President Trump signed the $1.3 trillion omnibus spending bill recently. A number of conservative voters were outraged at the size of this package, particularly that it appears to lack funding for any border wall. However, there are going to be enormous outlays for defense and Lockheed Martin stock will benefit.

That is fantastic news for a sector that did well even during the dovish Obama years. When I say “did well”, I am aware that revenues during those eight long years were pretty flat. Nevertheless, revenues did not decline to any great extent.

While investors would prefer to see growth in Lockheed Martin stock revenues, the truth is that the defense and aerospace sector produces products that are always going to be in some degree of demand. National defense is national defense.

Moreover, the defense and aerospace sector is an effective oligopoly. Between LMT stock, Northrop Grumman (NYSE:NOC), Boeing (NYSE:BA), Rockwell Collins (NYSE:COL), General Dynamics (NYSE:GD), and Raytheon (NYSE:RTN), there just aren’t that many other companies that do with luck he does.

Geopolitics and Lockheed Martin Stock

As it is, Lockheed Martin stock is going to be driven on the enormous revenue generated by the F – 35 fighter plane. Now we have an increase in defense spending, and the fact that the president is a hawk, who appears to want to modernize our countries aging military systems.

It’s meanwhile, we have the ongoing issues in the Middle East regarding Iran, Afghanistan, and Iraq. Were going to have some form of military presence there for quite some time. Then there is the short- to midterm problems coming out of North Korea.

That country’s saberrattling is rattling the nerves of its neighbors, and I expect to see orders for missile-defense systems on the rise. Not only that, we already know that South Korea increased the number of F 35 jets it ordered from 40 to 60.

The U.S. also just closed a massive arms deal with Saudi Arabia. All good news for Lockheed Martin stock.

Let’s also not forget about the growing tensions with China. It doesn’t seem like a trade war with China would have anything to do with defense, but when it comes to geopolitics there are many crosscurrents.

I don’t think there will ever be a time when Taiwan is not in conflict with China. Every time China rattles its own savers in regard to Taiwan, the world gets nervous.

That’s why some Republican senators of lobbied the president to allow Taiwan to purchase, you guessed it, more F – 35 jets. It’s a weird situation between the U.S. and Taiwan. China sees it as a rogue province and not as an independent nation.

The U.S., in wanting to maintain relationship with China, has not officially offered diplomatic relations with the island, however it has said it would protect it, and that includes supplying it with weapons.

What I’m getting at is that the secular environment for defense is very strong. I expected to be strong for the next 10 years, and that is going to lead to significant cash flow increases for Lockheed Martin stock, as well as significant increases in net income. That cash flow will still be available even after Lockheed continues to fund its pension obligations.

The Bottom Line on Lockheed Martin Stock

I think Lockheed Martin stock is rather expensive, but the entire market is at the present time. This is one of those situations where if you believe that you can stay in the market for 10 years or longer, buying Lockheed Martin stock at these prices is probably a good idea.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.


Article printed from InvestorPlace Media, https://investorplace.com/2018/03/boom-times-lockheed-martin-stock/.

©2024 InvestorPlace Media, LLC