Raytheon: Iron Dome and Defense

07/30/2014 8:00 am EST


Stephen Leeb

Founder and Research Chairman, Leeb Group

We expect there will be more jolts in the summer months, but, in all likelihood, those will be short-lived; bull markets don't simply die of old age, they need a prompt-which is still lacking-explains Stephen Leeb, editor The Complete Investor.

Our current assessment of the direction stocks are headed near-term, therefore, remains unchanged: Shares will stay essentially stuck in neutral. We don't expect stocks to decline much in the short run, and a decisive move above 2000 on the S&P appears equally improbable.

One possible threat to the bull market would be widening conflicts in the Middle East. Add Israel to that list: Military actions between Israel and Hamas are now in their seventh day. One clear winner from the hostilities-if there is such a thing-is Raytheon (RTN).

Israel's Iron Dome anti-missile defense shield, developed by the Israeli defense company Rafael-in conjunction with Raytheon-is proving itself wildly successful.

It's designed to intercept rockets fired from up to 43 miles away. Rather than attempt to defend against every incoming missile, the system targets only those that it has quickly assessed as threats to populated areas.

The system has proven to be extremely effective against more than 1,000 rockets Hamas has launched across the border in recent days, averting fatalities altogether.

The system has been so effective that, in many respects, Israel retains an air of business as usual these days, despite repeated attacks.

Raytheon recently finalized an agreement with its Israeli partner to produce major components for the Iron Dome's next generation, a longer-range (up to 200 miles) missile interceptor dubbed David's Sling, one of many defense and electronics systems to the company's name.

Raytheon is an undervalued stock that deserves a place in everyone's portfolio for its low-risk defensive characteristics and solid growth potential.

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