Put Your Investment Portfolio on the Defensive

Michael Robinson

Friday, March 17, 2023

It's not every day that an advanced U.S. fighter jet becomes an international celebrity.

No, I'm not referring to the ones used in the box office smash hit Top Gun: Maverick. I'm referring to one that emerged from the headlines following days of tension between the U.S. and China.

You see, an F-22 raptor shot down a high-altitude Chinese balloon just off the coast of South Carolina. And it was major news.

The elite fighter received all sorts of favorable publicity – mentions in the Associated Press, Business Insider, Reuters, and the Wall Street Journal.

The incident marked a turning point in our country's $800 billion defense system. It was the first time a U.S. jet shot down a target at an altitude of 58,000 feet.

Today, I'll reveal the company that makes this jet, and explain why the recent headlines certainly bode well for its investors.

Fighter Jets Take Flight

The F-22 may have been the plane that shot down this Chinese balloon. But this potential threat was being tracked long before by another legendary aircraft: the U-2.

A fleet of U-2s tracked the balloon starting from its departure from China and monitored the situation until the U.S. military could safely bring it down. That's when the F-22 finished the job.

The thing is, even seeing an F-22 in action is a rare sight. It's one of the best pure fighter jets in the world – not too surprising, considering the company that created it is home to Skunk Works, the name of its special development program, where it designs and builds a number of advanced aircraft.

But for a time, America didn't have a need to combat an enemy using these aircraft, so demand waned. Of the initial 750 ordered, only 187 were ever built.

Then 9/11 happened. And not only did demand for F-22s increase, but so did demand for the F-35, a more versatile plane.

The Marines use the F-35. So does the Air Force and Navy. And today, planes made by Lockheed Martin (NYSE: LMT) have become the golden tip of the spear when it comes to U.S. military and intelligence services.

A Reliable Play in a Reliable Sector

Look around, and it's no surprise that the defense sector is becoming the most reliable in our economy.

In fact, a recent study showed that defense has grown 10% in the past year, compared with just 0.8% average growth for other industrial-related sectors.

Whether by land, sea, air, or even space, LMT is a significant player. Its size and reputation make it a tempting prime contractor for the biggest and most challenging projects. And this temptation even helps second- and third-tier defense companies, too.

Lockheed's Sikorsky Division makes the iconic Blackhawk helicopter (40 were just delivered to Australia) as well as next-generation technologies like hypersonic missiles and directed energy weapons.

The company's missile systems will soon see demand in countries like Ukraine, Taiwan, and the Philippines, the latter of which is where the U.S. is establishing a new base.

In December, Lockheed finalized a deal with Congress to deliver nearly 400 more F-35s, and the Navy just ordered 20 more CH-53k heavy-lift helicopters.

Taking a wider view here, the takeaway is clear: When the world becomes unsettled, the best place to invest is in defensive stocks. And one of the best companies to invest in is Lockheed.

A Bang for Our Buck

Sales for the company will be on the upswing for its missile and fire control systems. And its hypersonic missile program, as well as its laser weapons, are showing tremendous progress. They should both lead to increased sales in the years ahead.

With a market cap of $123 billion, Lockheed trades at nearly $485 a share. But it pays a 2.5% dividend, an added bonus in a financial climate of rising interest rates.

Bear in mind, Lockheed isn't exactly a market crusher. But it's a safe play and a great case study of how investors can cash in on a top-flight defense contractor.

But maybe you're looking for a slightly higher-risk way to play this sector – a chance to earn higher returns? If so, check out my "Pro" recommendation. It's a defense-related company whose stock is owned by top hedge funds like BlackRock (BLK) and Vanguard (VOO). Now you can join them.



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Cheers and Good Investing,

Chief Investment Officer
Trend Trader Daily

Tags: fighter-jets military