investingfromtheright

I am retired and take educated guesses on all things financial.

October 08, 2006

October 9, 2006: Defense/Aerospace musings

Jim Cramer on CNBC TV "Mad Money" said something interesting a few days ago. Paraphrasing, "Defense stocks will go up whether Democrats or Republicans are in control. Republicans will spend because they are fighting a war. Democrats will spend because they do not want to be perceived as weak on national defense." I agree, for the most part. War fatigue has set in, yet another attack - a mathematical certainty- will further evolve into more defense spending. One of the few duties explicitly spelled out for our government to actually do: DEFEND THE COUNTRY.

For investors, as I have pointed out on several previous posts, well selected defense stocks are the way to go (not ETF's or mutual funds, as there will be too many losers). Speaking of losers: AIRBUS announced another one year delay on the Airbus 380. Maybe those billions in politically-correct government subsidies are doing as poor a job as the EU science and rocket programs.Airbus sucks at this time in almost every way.

What to do?

I still am very bullish on Boeing (BA), in spite of its runup. The shares can easily top $100.00 over the next several months. A sale this week of 16 747 freighters to the United Arab Emirates is just another drop in the bucket for upcoming Boeing orders worldwide.

ITT will announce the 1.58 billion dollar sale of SINCGARS radios and RTIN Patriot missile support equipmet to South Korea.

As a sleeper,keep a look out for a rise in DCP. It will put in a strong bid for a 4.8 billion dollar Army linguist contract. LLL/NOC may loose this contract, which would have a small impact on their 2007 earnings. DCP is a buy,in my opinion, as this rumor would not have filtered out if there was not a reasonable chance of them getting the contract.

SAIC will put out an initial IPO this month expected to total 1.2 billion dollars in equity. Employees will still own 81% of the capital stock and will receive a special dividend. I may be interested in this company after further analysis and the final announced sale price.It is extrememly well regarded in defense circles.

Other shares I like today in this area are Raytheon (RTN), L-3 Communications (LLL)and
Goodrich (GR)- a lot.

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