The prospect of geopolitical conflict impacting your investments – and potentially your retirement – has likely never been higher in your lifetime.
With the ongoing war between Russia and Ukraine – as well as the ever-growing prospect of China attacking Taiwan – investors should take the current geopolitical climate into consideration when evaluating their portfolio.
It’s possible that the escalation of these conflicts could send the stock market reeling in the short term. And it’s also possible, if not likely, that a number of defense-oriented stocks could bring the potential for significant profits in the months ahead.
With the United States, and many other nations, increasing their military spending in response to global events, many of the top defense stocks now look especially attractive.
The following 4 defense-oriented stocks are positioned well for 2024 and beyond. As always, be sure to do your own due diligence before investing in any stock to make sure it’s right for your financial situation and that it is consistent with your acceptable level of risk.
Top Stock #1: Raytheon Technologies Corp. (NYSE: RTX)
Raytheon Technologies Corp. (NYSE: RTX), an aerospace and defense company, provides systems and services for the commercial, military, and government customers worldwide.
The company operates through four segments: Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense.
The company’s anti-aircraft Stinger missile system just received a $687 million contract – for 1,468 new systems – from the U.S. government to replace those given in support of Ukraine’s defense against Russia.
In addition, it was announced on November 30 that the company was awarded a $1.2 billion contract for six National Advanced Surface-to-Air Missile Systems (NASAMS) for Ukraine.
The United States has approved sending Ukraine a total of eight NASAMS to help fend off Russian missile and drone attacks.
Ukraine received its first delivery of two NASAMS air defense systems in November. Others will be delivered in future months once they are built.
Top Stock #2: Moog Inc. (NYSE: MOG-A)
Moog Inc. (NYSE: MOG-A) designs, manufactures, and integrates precision motion and fluid controls and controls systems for original equipment manufacturers and end users in the aerospace, defense, and industrial markets worldwide.
Its solutions provide such things as precise missile steering (defense), flight control (commercial aerospace) and components and systems for satellites and launch vehicles (space).
The company just recently reported its financial results for the fiscal year ended October 1, 2022 and highlights included sales of $3.0 billion – up 6% from a year ago, as well as an operating margin of 9.3% and an adjusted operating margin of 10.2%, up 50 basis points from a year ago.
On July 19, the company announced a new four-year agreement with Triumph Group (NYSE: TGI) to provide maintenance and upkeep services for Boeing 787 landing gear and cargo door actuation control systems.
The company’s shares appear undervalued and it offers an attractive dividend. As of December 1, the stock is trading at a PE multiple of 18x and is offering a forward dividend yield of 1.04%.
Top Stock #3: Lockheed Martin Corp. (NYSE: LMT)
Lockheed Martin Corp. (NYSE: LMT), a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide.
The company operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space.
Lockheed Martin Corp. is one of the world’s largest and most diversified defense contractors with offerings ranging from fighter jets to electronic warfare, space and satellite systems, hypersonic weaponry and more.
Institutional investors love this stock, as they own 76% of the outstanding shares, implying that some of the world’s most successful analysts and investors are bullish on the prospects for Lockheed Martin.
In addition, the company also just won an $84.5 million contract to supply ground-based radar systems to Kuwait.
The demand for military radar systems has skyrocketed in recent months thanks to increased regional tensions and increased defense spending in emerging economies. This helps put Lockheed Martin in excellent position to continue winning massive contracts going forward.
Top Stock #4: Northrop Grumman Corp. (NYSE: NOC)
Northrop Grumman Corp. (NYSE: NOC) is one of the world’s largest defense contractors with annual revenue more than $30 billion.
The company is responsible for stealth bombers and has a large space portfolio. The company is closely tied to the nuclear triad, a combination of nuclear missiles, bombers, and submarines able to strike back if the nation is attacked.
On November 22, the company announced that it had clinched a modification contract to procure Active Electronically Scanned Array (“AESA”) radars for F-16 aircraft.
Valued at $99.4 million, the contract is expected to get completed by Jul 31, 2025. Per the terms of the deal, Northrop will procure 42 production radars, one initial spare kit and two readiness spare kits.
According to LRT Capital’s October investor letter, “Northrop (has been able to) earn stable mid-teens returns on invested capital (ROIC) and grow earnings per share at a rate of over 13% per year in the past decade, despite a topline that has grown only in-line with inflation. Even after the recent run-up in the stock price, it trades at approximate 15x, next year’s earnings estimates, far below the S&P 500 index, despite being an above average company.”