Facing a deadline to prevent a government shutdown in March 2018, the House and Senate put together a $1.3 trillion spending bill that was signed by President Trump. Running 2,000-plus pages, the bill allocated federal money through the end of September 2018 and included quite a boost to defense spending.
And to smart investors…
In fact, Congress just earmarked $654.6 billion for the Pentagon – an increase of $61.1 billion year over year, as global tensions increase with North Korea, Russia, China and the Middle East.
"Overall, this is the biggest year-to-year increase in defense funding in 15 years -- a $61 billion increase over FY2017 enacted levels," the Senate Defense Appropriations Committee said in its overview, as quoted by Miltary.com.
That’s big news for stocks like Boeing (BA), Lockheed Martin (LMT), Northrop Grumman (NOC) and Raytheon (RTN).
Missile defense will see $11.5 billion, a year over year increase of $3.3 billion. That’s also more than the $9.5 billion initially requested by the Missile Defense Agency (MDA), which will also get $393 million to speed up Boeing’s “modernization of the kill vehicle in 20 Ground-Based Midcourse Defense System interceptors.”
Congress also approved the purchase of 24 new Boeing F/A-18 Super Hornet, and three more Boeing KC-46 tankers.
That’s quite a win for Boeing.
The budget also includes $165 million for more Lockheed Terminal High Altitude Area Defense interceptors, and $178 million for RTN SM-3 interceptors and another $137 million for RTN Sm-3 Block IIA missiles.
Then, Congress approved $84 million for six Northrop MQ-8 Fire Scout helicopters.
As a result of the announcement, those four stocks moved higher:
- Boeing ran from $320 to $340.
- Lockheed Martin jumped from $325 to $345
- Northrop Grumman (increased from $338 to $355
- Raytheon shot from $209 to $220
Military-related stocks should continue to do well because of the spending increases for defense programs.
The Cheap Investor will be searching for a few quality, low-priced stocks in this sector.