We all know the saying: “The best defense is a good offense.” But in light of recent events, I propose that we make a small tweak to it: “Our best defense is with defense stocks.”
Unfortunately, escalating violence in the Middle East has forced the Unites States’ hand. Just a few weeks ago, President Obama authorized air strikes to aid the Iraqi military as it fights the terrorist organization ISIS. The conflict in Northern Iraq has escalated quickly as the ISIS has captured the Iraqi city of Mosul and a major hydroelectric dam; it has forced well over 1.2 million Iraqi citizens from their homes.
France has officially backed the U.S. actions and an international collation is forming to confront ISIS. Pope Francis also appealed to world leaders to help end the humanitarian crisis that has been unfolding in Northern Iraq.
These events are tragic, and there is still much uncertainty surrounding the how much military action will be needed. Even so, many appear to welcome a more decisive U.S., so we haven’t seen any big selloffs triggered by these unfortunate events.
In the meantime, those who are looking to protect themselves against any resulting uncertainty would do well do add a few aerospace and defense plays to their portfolio. I have several in my Blue Chip Growth letter, my favorite being Lockheed Martin (LMT) right now.
Lockheed Martin’s core businesses are aeronautics, information systems, missiles, mission systems and space systems. Between these five segments the company brings in over $47 billion in sales each year. And Lockheed Martin’s F-35 stealth fighter is making a splash with the U.S. armed forces. With features like a 360-degree view from the cockpit, supersonic top speeds and a custom fuselage, the F-35 is at the cutting edge of aviation. The military has committed to buying 365 of the aircraft for $400 billion, making this the most expensive weapons system ever. Beyond the F-35, Lockheed Martin is also a pioneer in clean energy. It is involved with the world’s largest wave and tidal energy project off the coast of Victoria, Australia.
This company has been surprising analysts left and right for the past several quarters so forward earnings projections keep rising. Looking ahead to FY 2014, management recently raised its earnings outlook to a range of $10.85 to $11.15 per share (up from $10.50 to $10.80 previously).
Yield seekers may also like to know that the stock will go ex-dividend soon. Shareholders of record on September 2 will be paid $1.33 per share on September 26. At current prices LMT yields 3.2%.
I consider LMT a buy right now. If you’re looking for other opportunities in the small- and mid-cap arena, click here to see my top rated Portfolio Grader picks in the defense and aerospace industry.