11/18/2005 12:00 am EST
Just over a year ago, Neil George highlighted a several companies "poised to benefit from the US government’s financial commitment to security and defense." Here’s he reviews those picks—all have shown solid gains—and updates his outlook.
"The continuing global war on terrorism and an unstable global situation have only strengthened the positions of the companies we first recommended in the Oct. 27, 2004 issue. Whether responding to security threats or administering aid to regions devastated by natural forces, the US military has been and will continue to be very busy. We still favor the following companies based on their current capabilities and their longstanding relationships with the Pentagon.
"Anteon International (ANT NYSE) continues to rack up contracts to provide information technology to federal agencies. Anteon recently finalized arrangements with the US Air Force, the Dept. of the Interior, and the Dept. of Health and Human Services. The stock is up a modest 5.7% since first recommended and we would continue to buy up to 48.
"DRS Technologies (DRS NYSE) has gained 39.5% since our original recommendation. The firm will provide the missile launch system in the TOW weapons system for the US Army’s Bradley fighting vehicles, an integral part of the Army’s operations in Iraq. DRS recently launched a takeover bid for Engineered Support Systems, which was also on our original list of recommended security stocks. The acquisition only broadens DRS’ exposure to Iraq-related spending. The stock is a buy up to 54.
"Elbit Systems (ESLT NASDAQ) is up 11.6%. The Haifa, Israel-based defense electronics firm and a Growth Portfolio holding, won an order for as much as $57 million from the US Army for night-vision and other equipment. The company’s US unit, EFW, will provide the systems over a five-year period. Elbit is a buy up to 27.
"General Dynamics (GD NYSE) is up 13.9% and remains a Big Defense favorite. US defense outlays in September 2005 were higher than ever, a positive sign for this systems provider. Buy General Dynamics up to 122.
"Harris Corp. (HRS NYSE) has gained 27.2%.The company is critical to the establishment and maintenance of communications in the battlefield. The equipment provider has also expanded its commercial broadcast capabilities. We continue to view Harris Corp. as a buy at prices up to 42.
"Lockheed Martin (LMT NYSE) is up 13%. The company’s third quarter earnings climbed 39% on a 9% increase in sales. The world’s largest defense contractor stands to benefit even further from the rising costs of the war in Iraq. Buy Lockheed Martin up to 65.
"Northrop Grumman (NOC NYSE) is up 7.8%. The company announced a 5.4% profit increase October 25, though sales were slightly depressed by Hurricane Katrina. It could be a year until its shipbuilding capabilities are restored, but results from Northrop’s other units continue to be strong. NOC is a buy up to 58."