Leidos: A Defensive Play in Military Defense

09/12/2019 5:00 am EST

Focus: INDUSTRIALS

Joe Duarte

Editor, Joe Duarte In the Money Options

It’s presently not as easy to find winners as it was at the end of the Q4 rout in stocks. But, it’s not impossible either, if you keep an open mind and look for the correct situation and setup, notes Dr. Joe Duarte, editor of In the Money Options.

Recent volatility has created some opportunities in stocks of companies which happen to be in the right place at the right time such as software designer and administrator Leidos Holdings (LDOS), which I recommended in April 2019, about 36% below its recent closing price.

Leidos is poised to do well over the longer term because of its customer base; local, state, and the Federal governments, especially the U.S. Department of Defense.

And it’s the latter where I expect there will be more growth in the not too distant future due to the U.S.-China trade war and the rising need for intelligence gathering and data sorting as the geopolitical situation remains a hot mess.

In other words, as long as there are taxpayers to foot the bill and geopolitics to create a need for spyware and systems administration, LDOS will have business.

Moreover, they’ve been getting paid well for their wares as they beat expectations and raised their guidance while announcing a growing book of pending deals in their most recent earnings report.

One example of such a deal, which has recently closed is a $160 million pact with the U.S. Army for software engineering at Mission Command, and management of fires and radar systems.

At the same time the company just completed the acquisition of IMX Medical Management Services which will bring the revenue of data management for three thousand medical exams and medical reviews per day from key federal customers. I expect another positive earnings report in late October. LDOS will also pay a dividend of $0.34 on 9/30/19.

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