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13 Defense and Aerospace Stocks to Consider

by: Stockerblog September 24, 2008 | about stocks: ATK / BA / CGT / COL / DRS / ERJ / ESLT / GD / GR / HON / LMT / NOC / RTN    

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If you still haven't put any defense and aerospace stocks in your portfolio, you should seriously consider doing so before October. There are plenty of these 'war' stocks to choose from, including ones that pay high yields. Here are some that you may want to site your scopes on and possibly pull the trigger. All of these have market caps over $1 billion:

  • Alliant Techsystems Inc. (ATK) manufactures and markets aerospace and defense products and ammunition. The stock has a P/E of 16, and a PEG of 1.56.
  • Boeing (BA) makes and markets jets, military aircraft, missile defense systems, satellites, and launch systems. The stock has a P/E of 11, a PEG of 0.83, and pays a yield of 2.8%.
  • CAE Inc. (CGT) makes and markets simulation equipment and services to the civil aviation industry, military organizations, and defense organizations. The stock has a P/E of 17, and pays a yield of 1.2%.
  • DRS Technologies Inc. (DRS) a provider of defense electronic products, defense systems, and military support services. The stock has a P/E of 19, a PEG of 1.34 , and pays a yield of 0.2%.
  • Elbit Systems Ltd. (ESLT) is an Israeli company that makes unmanned air vehicles, advanced electro-optic and space technologies, electronic warfare suites, airborne warning systems, electronic intelligence systems, and military communications systems. The stock has a P/E of 18, a PEG of 1.77, and pays a yield of 1.7%.
  • Embraer, also known as Empresa Brasileira De Aeronutica S.A. (ERJ) based in Brazil, makes and markets jets and aircraft for defense and civil aviation markets. The stock has a P/E of 14, a PEG of 0.86, and pays a yield of 3.9%.
  • General Dynamics Corp. (GD) manufactures aviation products, combat vehicles, weapons systems, and munitions. The stock has a P/E of 14, a PEG of 1.32, and pays a yield of 1.7%.
  • Goodrich Corp. (GR) makes and markets components and systems for the commercial and general aviation airplane markets, and the defense and space markets. The stock has a P/E of 10, a PEG of 0.62, and pays a yield of 2%.
  • Honeywell International Inc. (HON) is involved in the business of aerospace, automation solutions, specialty materials, and transportation systems. The stock has a P/E of 13, a PEG of 1.05, and a yield of 2.5%.
  • Lockheed Martin Corporation (LMT) manufactures military aircraft, and air vehicles, including the F-35 Joint Strike Fighter, the F-22 air dominance attack aircraft, and the F-16 multi-role fighter. The stock has a P/E of 15, a PEG of 1.25, and pays a yield of 1.6%.
  • Northrop Grumman Corp. (NOC) provides aerospace products, electronics, and shipbuilding to the military, government, and commercial customers. The stock has a P/E of 13, a PEG of 1.03 , and pays a yield of 2.5%.
  • Raytheon (RTN) has six divisions: Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems, and Technical Services. The stock has a P/E of 15, a PEG of 1.11, and pays a yield of 2%.
  • Rockwell Collins Inc. (COL) makes and markets communications and aviation electronics. The stock has a P/E of 13, a PEG of 0.8, and pays a yield of 2%.

If you like high yield stocks, you should also consider Top Monthly Dividend Stocks, Top Yielding NYSE Stocks, and Stocks with Tax Free Dividends.


Disclosure: Author does not own any of the above.

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This article has 7 comments:

  •  
    Sep 21 04:11 PM
    A true expert.Does n ot seem to know DRS sale to an Italian company is in final stage.
    Reply
  •  
    Sep 21 04:18 PM
    not only do they not know that DRS is being sold to Finmeccanica, they also took the wrong Goodrich - try GR instead. do some homework before posting as well...
    Reply
  •  
    Sep 22 08:36 AM
    Defense stocks should be bought today if, and only if, the purchaser believes Republicans retain the White House in six weeks. The Democratic candidate will, much as the incumbent from 1992-2000, gut the military budget which has roughly doubled the past seven years, excluding war-fighting supplements which bring total spending even higher. Deterring an increasingly outrageously behaving natural resource-fortified Russia, and ambiguous but nonetheless very real Chinese military power, will require a further 40-50% spending increase in real dollars over 6 years to 5-6% of GDP from 4.5% today, bringing annual spending to $700-750 billion in 2014, imputing 8-10% compound growth in contractor revenues and 12-14% per share earnings. A Democratic administration will follow an internationalist agenda focused on multilateral institutions and reduce spending toward the 2-3% of GDP of the mid-late 1990s, when the party last held power, imputing 5%-8% annual reductions in contractor revenues and 10-15% lower earnings as the cutbacks will fall disproportionately on weaponry and services. P/Es that today are roughly market multiples will rapidly jump 30%, or more, if McCain wins, while the market will be slower to cast an Obama victory as negatively as our analysis casts, hence a protracted sell-off as reported fundamentals climb into 2010 from the last Bush budget (FY09). We believe the odds favor the bull case, so we continue to recommend purchase of leading aerospace/defense shares such as GD, NOC, LLL, RTN, BA, COL, CW, MOG/A, GR and PCP, but will have more to say on November 5th.
    Reply
  •  
    Sep 22 10:07 AM

    how could you fail to include the best of the best, Precision Castparts PCP, a rare gem?
    Reply
  •  
    Sep 22 11:56 AM
    First a correction...defense spending rose in the final two years of the Clinton administration and began its decline under Bush Sr.

    Don't believe that a democratic victory in november will not necessary mean a decline in defense spending. Also don't believe that a democratic congress will increase spending on defense just because a republican is in the white house. Defense stocks have declined because of the perception held by aerowain but the actual budget is likely to remain the same regardless of who wins. There was a point made in the recent spade investor newsletter, a freebie from the people who put out the spade defense index if you're not familiar with it, that any decline in spending regardless of who wins would wipe out the party in future elections in the aftermath of another terrorist incident. I can picture the political ads that would run for 10 or 20 years pushing this fact, and I imagine so can you. The money would obviously be spent in differing places but that might not be a bad thing. And with the U.S. budget and financial mess we are in, it will preclude an increase in defense spending that aerorick is highlighting under a mccain presidency. Don't get me wrong, I think defense (and aerospace) stocks are hugely undervalued at this point and have put money into PPA (the powershares ETF) but I think the reality of the earnings and revenues the company's post won't be that different regardless of the winner in the upcoming election.
    Reply
  •  
    Sep 24 04:00 AM
    mtp was correct, we had the wrong ticker up for Goodrich -- thanks for catching it, and the article should now reflect the correction.
    Reply
  •  
    Sep 24 11:01 AM
    I totally disagree. With the US budget deficit ballooning as we bail out the financial sector, and as raising taxes is not popular, the only way is deal with an alarming budget deficit is to cut spending especially military spending. This is in particular true if Obam wins the elections. I would short the defense sector.
    Reply
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