Defense Stocks: A "Lay-Up"

08/23/2016 9:00 am EST

Focus: STOCKS

Jim Powell

Principal Analyst, Global Changes & Opportunities

Rising global terrorism is adding to growing tensions between nations to create a lay-up shot for major defense companies, explains Jim Powell, editor of Global Changes & Opportunities Report.

In our model portfolio we own four major defense sector positions: General Dynamics (GD), Lockheed Martin (LMT), Northrop Grumman (NOC), and Raytheon (RTN).

With Washington’s new arms race with Russia and China heating up, I don’t think a long-term investor can go wrong with any of them.

If you wish to buy just one defense stock, I think it should be Lockheed Martin, the Pentagon’s primary contractor.

Once again, the company reported better-than-expected earnings driven by higher deliveries of F-35 fighter jets as well as increased sales of its Sikorsky helicopters.

LMT also boosted its full-year outlook for earnings, revenues, and cash flow. The stock is up 236.6% for us, and should go a lot higher.

Investors who would prefer a smaller anti-terrorism stock should consider OSI Systems (OSIS), a leading maker of scanners.

The firm's scanners are used in airports, seaports, and railroads around the world. The company is also a leading supplier of handheld sniffers that detect explosives.

There is already a great deal of popular support for tightening America’s borders and keeping a closer watch on the people who wish to cross them.

In addition, if we have another big terrorist attack, that sentiment will skyrocket – and so will OSI Systems’ stock.

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