5 Defense Stocks to Tap US-North Korea Denuclearization Row

By Gourav Kanti Bagchi, Zacks Investment Research

http://bit.ly/2IOYTl3

On May 16, North Korea canceled a meeting with its southern counterpart and even threatened to cancel a planned meeting with President Donald Trump. In fact, North Korea’s vice-foreign minister Kim Kye-gwan said that the United States together with South Korea harbor sinister intentions toward Pyongyang. North Korea’s latest move raised a new set of geo-political concerns.

5 Defense Stocks to Tap US-North Korea Denuclearization Row

Additionally, Trump’s National Security Advisor John Bolton’s latest statement also grabbed investor attention. In this context, defense stocks seem to be a lucrative investment choice.

North Korea to Cancel Jun 12 Meeting

North Korea’s vice-foreign minister Kim Kye-gwan said on May 16 that if the United States was “genuinely committed” to move toward a better relationship with North Korea, it should have given encouraging response.

This came after in an interview on Apr 29, Trump’s National Security Advisor John Bolton said that the United States will go with the “Libya model” for North Korea.

Clearly, during 2003-04, the denuclearization program in Libya ended with Colonel Muammar Gaddafi’s death. Citing U.S.’s Libya model, Kye-gwan said that following Bolton’s statement, North Korea is no mood to negotiate with the former, when the Trump administration is focused on all “about driving North Korea into a corner.”

Kye-gwan also slammed the United States for “making a one-sided demand” and now thinking whether to “accept the North Korea-U.S. summit meeting” or not.

Bolton Raises Questions, South Korea to Mediate

On May 16, in an interview, Security Advisor Bolton said that he found “nothing new” in North Korea’s statement and wondered whether North Korea is at all taking the U.S. “objective of denuclearization seriously.”

Bolton added that in case the Kim Jong-un administration refuses to agree with the United States’ denuclearization program in Singapore, the meeting will be “pretty short.” He even called North Korea’s decision to cancel the meeting with its southern counterpart “discouraging.”

After North Korea’s warning to skip the Singapore meeting, the South Korean government has wished to act as “a mediator” between South Korea, North Korea, and the U.S. However, South Korean Foreign Minister Kang Kyung-wha agreed that North Korea and the U.S. have different opinions “on methods to accomplish denuclearisation.”

5 Best Defense Stocks

Renewed tensions between North Korea and the U.S. have brought the spotlight back on companies that are involved in the defense industry. In this context, we can say that companies involved in the manufacture, processing, and delivery of defense equipment and services would be good investments.

Here, we have selected five stocks that are expected to gain following these developments. These five stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) is a provider of mission-critical products, solutions, and services in the United States.

This California-based company has a Zacks Rank #1. The expected earnings growth rate for the current year is 53.33%. The Zacks Consensus Estimate for the current year has improved 5.9% over the last 30 days. Kratos Defense & Security Solutions has gained 11.4% in the last one year.

Boeing Co (NYSE:BA) is a manufacturer of commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services.

This Illinois-based company has a Zacks Rank #2. The expected earnings growth rate for the current year is 21.32%. The Zacks Consensus Estimate for the current year has improved 4% over the last 30 days. Boeing has gained 92.2% in the last one year.

Wesco Aircraft Holdings Inc (NYSE:WAIR) is a provider of aerospace products and supply chain management services to the aerospace industry.

This California-based company has a Zacks Rank #2. The expected earnings growth rate for the current year is 29.94%. The Zacks Consensus Estimate for the current year has improved 10% over the last 30 days. Wesco Aircraft Holdings has gained 14.9% in the last one year.

ManTech International Corp (NASDAQ:MANT) is a provider of technologies and solutions for mission-critical national security programs.

This Virginia-based company has a Zacks Rank #2. The expected earnings growth rate for the current year is 26.54%. The Zacks Consensus Estimate for the current year has improved 2% over the last 30 days. ManTech International has gained 39.2% in the last one year.

CPI Aerostructures, Inc. (NYSEAMERICAN:CVU) is engaged in the contract production of structural aircraft parts and sub-assemblies for the commercial and military sectors of the aircraft industry.

This New York-based company has a Zacks Rank #2. The expected earnings growth rate for the current year is 31.54%. The Zacks Consensus Estimate for the current year has improved 8.9% over the last 30 days. CPI Aerostructures has gained 35.6% in the last one year.

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