Military defense is always at the front line of a nation’s security. With political tensions on the rise around the globe, defense stocks are one of the smarter money-investing decisions to make. An article on CNBC called defense stocks “acyclical.” Meaning, they move in 20-year cycles and that spending will not have much impact on which party goes into power.
Spending on defense occupies a big share of the government’s budget. For this fiscal year in the United States, the government has set aside $854 billion in its budget for the Departments of Defense and State, including the Veterans Administration. Moreover, InvestorPlace reported that defense spending would be allocated to increases in the number of duty troops, for modernization of military facilities, increases in missile defense and building more navy ships.
With newly elected President Donald Trump occupying a seat in the White House and intensifying border protection, defense stocks are on the rise, allowing defense contractors to outperform the market. According to Seeking Alpha, in the past 10 years, the S&P Aerospace & Defense Select Index “outperformed the S&P 500 by more than 6% annually.” Also reported is the likelihood that sequester spending caps will be removed from the defense budget and that defense stocks will do well in 2017.
With the bright outlook for security and defense stocks this year, investing in them could prove to be highly lucrative. This list profiles several companies that are worth investing in and could be an excellent addition to any investor’s stock portfolio:
General Dynamics (NYSE:GD)
With record operating earnings of $4.2 billion, General Dynamics (NYSE:GD) is a global company specializing in aerospace and defense, combat systems, information systems and technology, and marine systems. The company is a top supplier for the U.S. Navy and NASSCO (National Steel and Shipbuilding Company), which is a key navy supplier. The company has a funded backlog worth $51 billion that includes an $18 billion contract signed in 2014 for the delivery of 10 Virginia-class (nuclear attack) submarines spread out until 2023, and $3.4 billion for a five-ship contract, which was signed in 2013.
Kratos® Defense and Security Solutions
Specializing in target drones that train pilots and test weapons, Kratos Defense & Security Solutions (NASDAQ:KTOS) has a market capitalization of about $500 million and shares at about $7. The company has big-ticket contracts with the U.S. Air Force and the U.S. Navy to provide high-performance aerial target systems. With $165.4 million in revenue in Q3, Kratos’s largest revenue contributors were its Government Solutions and Unmanned Systems segments at $112.8 million and $18.3 million, respectively.
Lockheed Martin (NYSE:LMT)
Operating in four business segments organized by the nature of the products and services they offer, Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space Systems, Lockheed Martin (NYSE:LMT) is one of the world’s largest defense companies. Since 2001, the company has awarded investors an annualized return of 13.21%. In 2015, the company acquired Sikorsky Aircraft from United Technologies (NYSE:UTX) for $9 billion, making Lockheed Martin the leader in military helicopter manufacturing.
Patriot One Technologies
Specializing in the detection of concealed weapons on moving targets, Patriot One Technologies Inc. (OTC:PTOTF, TSX.V:PAT, F:0PL) conducted five years of advanced academic-backed research to produce what would become the first commercial Cognitive Microwave Radar (CMR) cognitive weapons detection device. In response to the June 2016 shooting at the Pulse nightclub, the company recently announced an agreement with Orlando-based VGroup Concepts to showcase Patriot One’s NForce CMR1000 software and radar device from January 2017 to January 2018. The NForce CMR1000 is slated to be installed at several VGroup entertainment properties in Orlando to establish “safe districts.”
Raytheon
Best-known for its Patriot Air and Missile Defense System, Raytheon (NYSE:RTN) specializes in defense electronics, missiles and integrated defense systems for ships. The company was recently awarded a $600 million defense system contract and services 13 customer nations for the Patriot missile defense system. Moreover, the company has a market cap of $43 billion and is trading at $145 per share.
Be sure to give these companies a look in 2017.