Aerospace & Defense Stocks – January 2020


During time of war it seems that Aerospace and Defense stocks perform reasonably well.

Are we at war?  

Some say we are and some say we aren’t yet.  I’d say with the killing of Gen. Qasem Soleimani, recently — if we are not at war with Iran, we could be soon.  Instead of pulling our troops out of the Middle East, which President Trump announced he was doing a month or so ago, he has recently sent another 3,500 troops to the middle east after the recent killing of this terrible Iranian General.

I pulled a list of stocks that were showing price increases today (01/06/2020), while the market was down, using my Vectorvest Software and in pulling this list I asked specifically for stocks that were trending higher today on price … had an RT (relative timing) of 1.0 or higher, an RS (relative safety) of 1.0 or higher and a RV (relative value) of 1.0 or higher.  It is important to remember that these three vectors from Vectorvest are based on a rating scale of 0 to 2 with 1 or higher being good and anything below 1 not being so good.

Relative Timing (RT) means that the stock for the short term is trending up (above 1.0) or down (below 1.0).  Relative Safety means the stock has good or bad fundamentals (1.0 or higher is good and below 1.0 is not so good).  Relative Value means the stock is trading at a good price to valuation.

There are two other measures you will see in this table below:  VST is a Value, Safety, Timing vector (again on a scale of 0 to 2) and CI is the comfort index meaning the price is relatively stable and the price chart would show a general rise of price from the lower left of the chart to the upper right of the chart over the past one year and one quarter.  CI is also rated on a scale of 0 to 2.  You will notice that all the stocks in this table have a VST rating above 1.0 and a CI rating of above 1.0.

Based on how Vectorvest values stocks you will notice also (looking at the value – price column) that 4 of these 8 stocks are currently overvalued and 4 are undervalued.  Notice also that 7 of these stocks fall within the Aerospace and Defense sector while one falls in the Telecommunications Sector.  We will discuss this one stock later.  For now, take a look at the list:

Aerospace stocks

Hopefully, if you click on the picture above you will be able to see a larger table.  For now let’s talk a little about what each of these companies does in case you don’t know.

NOC – Northrop Grumman

Northrop Grumman Corporation provides products, services, and solutions in information and services, aerospace, electronics, and shipbuilding in the United States. Its Information & Services business integrates command, control, communications, computers and intelligence, missile and air defense, airborne reconnaissance, intelligence management and processing, and decision support systems; provides information technology systems engineering and systems integration for the Department of Defense, national intelligence, federal, civilian, state and local agencies, and commercial customers; and offers infrastructure management and maintenance, training and preparedness, and logistics and life cycle management services.

HII – Huntington Ingalls

Huntington Ingalls Industries Inc (HII) designs, builds and maintains nuclear and non-nuclear ships for the United States Navy and Coast Guard, and provides aftermarket services for military ships around the globe. HII’s primary business divisions are Ingalls Shipbuilding and Newport News Shipbuilding (NNS).

TDY– Teledyne Technologies

Teledyne Technologies Incorporated provides electronic components and subsystems, instrumentation, and communications products in the United States, Europe, Japan, and Canada. The company operates in four segments: Electronics and Communications, Engineered Systems, Aerospace Engines and Components, and Energy and Power Systems.

AJRD – Aerojet Rocketdyne Holdings

Aerojet Rocketdyne Holdings, Inc., formerly GenCorp, Inc., is a manufacturer of aerospace and defense products and systems with a real estate segment that includes activities related to the re-zoning, entitlement, sale and leasing of its excess real estate assets. The Company develops and manufactures propulsion systems for defense and space applications, and armaments for precision tactical and long range weapon systems applications.

GD – General Dynamics

General Dynamics Corporation provides business aviation; combat vehicles, weapons systems, and munitions; shipbuilding design and construction; and information systems, technologies, and services. The company’s Aerospace segment provides mid-size and large-cabin Gulfstream business-jet aircraft, as well as provides maintenance, refurbishment, outfitting, and aircraft services for various business-jet, wide-body, and narrow-body aircraft customers.

CAE – CAE Inc.

CAE Inc., together with its subsidiaries, designs, manufactures, and supplies simulation equipment and services to the military, commercial airlines, business aircraft operators, and aircraft manufacturers worldwide. The company operates through four segments: Simulation Products/Civil, Simulation Products/Military, Training and Services/Civil, and Training and Services/Military.

ESLT – Elbit Systems

Elbit Systems Ltd. develops, manufactures, and integrates defense electronic and electro-optic systems primarily in Israel, the United States, and Europe. The company involves in military aircraft and helicopter systems; helmet mounted systems; commercial aviation systems and aero structures; unmanned air vehicle systems; naval systems; land vehicle systems; command, control, communications, computer, and intelligence (C4I) systems; electro-optic and countermeasures systems; homeland security systems; electronic warfare (EW) and signal intelligence (SIGINT) systems; and various commercial activities.
Now, if you were to click on the blue ticker symbols above (e.g. NOC, HII, GD etc.) it should pull up a one year chart from Yahoo Finance that allows you to change the time frame.  The idea is to show that all of these are up in value over the past one year and all have had dips during that period of time.
But. let’s talk about the one that I did not mention above and added to this list.  I picked this up from Investors Business Daily.  You see I use more than one site to do my research – as should any of you.

LHX – L3Harris Technologies

This is the IBD stock of the day.

L3Harris is the result of last year’s merger between Harris Corp. and L3 Technologies. The firm is expected to come up with $18 billion in annualized revenues when its integration is complete.

The company makes battlefield communications systems, night-vision devices, sensors and satellite communications. It also makes a computer processor for Lockheed Martin‘s (LMT) F-35 stealth fighter.

Defense stocks overall had a strong 2019 as the Trump administration looks to invest heavily in new U.S. capabilities while the expanding Pentagon budget enjoys rare bipartisan support in Congress.

You can click here and get the Vectorvest Analysis summary of this particular stock.  I think you may also understand why Vectorvest places it in the Telecommunications Sector rather than the aerospace and defense sector as well … even though a lot of what they do is in the aerospace and defense sector.

The bottom line:

If you are looking to add some stocks to your portfolio in the near future … you may want to consider one or two of the ones mentioned in this report.  One of my favorites, Boeing (BA) did not make the list.  Because of it’s problems with the 737 passenger jet being grounded due to a few crashes it has trended down in price since about February 2019.  However, with a current price of $322.06 Vectorvest says it is valued at $364.17 – so it is underpriced now.  If you are feeling a little “contrarian” this may be a good one to take a look at – though they are not out of trouble yet.

Though it’s RV is 1.17 and it’s RS is 1.15 – the RT (relative timing) is only 0.94 as I write this and the CI (comfort index) is only 0.51.  It would not be comfortable watching this one over the next few months … but it could pay off long-term.  It did hit a high of $440.62 back on February 25, 2019 and could get back to that price with a little good news coming it’s way.

Here’s a list of all 44 stocks found in the Vectorvest software ranked from Highest VST to Lowest VST if you want to do some of your own research.

Aerospace stocks2020-1

Again click on the graphic to see a larger copy.

Finally, if you prefer not to do your own research, call your financial advisor and ask for his or her help.  Do not call me as I am not licensed to give financial advice.  The only purpose of this article is to provide some education as a starting point for you to come to your own decision or a decision with the assistance of a competent financial advisor.

Also do not pay any attention to the Buy, Hold, or Sell recommendations in the table.  These recommendations can change on a daily basis since a lot of “day traders” use this service.

Thank you and let me know if you have some questions I can answer for you.

Until next time … go make a few waves,

Jerry Nix | FreeWaveMaker, LLC

 

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