In a Dangerous World, Play Defense!


Mike Larson Image Mike Larson Senior Analyst, Weiss Ratings

In a world of military tensions, Weiss Ratings senior analyst Mike Larson recommends defense stocks Raytheon (RTN), Lockheed Martin (LMT), Huntington Ingalls Industries (HII) and ETFs like PowerShares Aerospace & Defense Portfolio (PPA).

How do you negotiate with a madman? Successive US presidents have tried to figure it out when it comes to North Korea.

But current “Dear Leader” Kim Jong-un isn’t proving any more open to talks or reason than his predecessor Kim Jong-il. He made that abundantly clear recently with fresh missile tests and another salvo of anti-US propaganda. The rogue nation is even reportedly preparing for another, potentially more powerful underground nuclear bomb test.

Sadly, North Korea isn’t all we have to worry about these days. China is launching a de factor takeover of the South China Sea, building military facilities on islands and reefs throughout that disputed body of water. Russia is fomenting unrest in the Ukraine, consolidating its position in Crimea, and staunchly backing the Syrian government in its brutal civil war. Plus, low-grade proxy conflicts are continuing to plague Afghanistan, Yemen, and other Middle East hot spots–even as our fight against ISIS rages on.

I wish this weren’t the kind of world we lived in. But as an investment analyst, my job isn’t to make recommendations on my hopes, wishes, or personal beliefs. I have to base them on reality. And in this dangerous world, my suggestion is to “play defense” by investing in the companies that are helping keep America and our allies safe.

Take a firm like Raytheon (RTN). The diversified defense contractor makes the Tomahawk cruise missile, which Donald Trump just ordered 59 aimed at a Syrian air base. Raytheon also produces defensive systems like Patriot anti-missile batteries and Phalanx guns used to defeat incoming anti-ship missiles. RTN earns one of the highest Weiss Stock Ratings our company offers, an “A-” (BUY), and was recently sporting one-year total returns of around 22%.

Lockheed Martin (LMT) is the largest US contractor, and the designer of the “THAAD” anti-missile system. The acronym stands for Terminal High Altitude Area Defense, and it’s designed to shoot down longer-range, more-sophisticated missiles like those North Korea is now testing.

South Korea received the first components of the THAAD system earlier this year, and just said it plans to accelerate the deployment.