by Marc Lichtenfeld, Advisory Panelist
Wednesday, March 10, 2010: Issue #1213
There was a time when companies charged with defending the United States had to endure the changing political winds.
When hawkish Presidents occupied the White House, defense companies generally fared better than when the Commander-in-Chief was a dove.
Then 9/11 happened – and everything changed.
A New York Times article hammered that home last Saturday, with the story of how a suspected terrorist collaborator has achieved heroine status in Pakistan. What makes the fact that she’s considered a hero so shocking is that her actions go against the beliefs of many Pakistanis.
The last paragraph of the article contains a chilling quote from Pakistani columnist, Rafia Zakaria:
“Leaving a husband for a second marriage, traveling alone, even putting your children in harm’s way, all acts that would be otherwise reviled, became acceptable when they are done with the ultimate aim of defying the United States.”
When people hate others more than they love their children – and when others support that hate even when their values are compromised – the target of their hate has a serious problem.
I recently saw the toll that this hatred can take…
Defense Stocks: Investing In the Defense Sector’s Long-Term Growth
While I was waiting for a flight at a crowded gate in Washington D.C., a family of three sat down. One was an elderly woman. The other two were in their forties or fifties. They were dressed up. The younger woman was carrying a bible and an American flag folded in the shape of a triangle. They had just come from burying her son at Arlington National Cemetery.
He was an infantryman killed in Iraq. The woman alternated between airport business (making phone calls and checking on the flight) and staring vacantly, likely thinking about her boy.
My heart ached for her. I wanted to tell her how sorry I was for her loss, but I didn’t want to disturb what may have been a temporary moment of distraction. Although I’m not particularly religious, I silently said a prayer instead, asking for the rest of our men and women in uniform to be kept safe.
At that moment, my idea for this column gelled.
So I started researching companies with innovative, leading products that keep our soldiers and citizens safe. Here are three defense stocks…
- Esterline (NYSE: ESL) manufactures various defense and industrial products, such as radar counter-measure decoys for aircraft and other anti-missile and torpedo decoys. The stock trades just barely above its book value and at less than 14 times this year’s expected earnings of $3.35 per share.
- Force Protection (Nasdaq: FRPT) makes bulletproof and blast-resistant vehicles – essential for troops in both Iraq and Afghanistan. The company has loads of cash ($122 million), no debt and its earnings are expected to grow by 20% per year over the next five years.
- Global Defense Technology & Systems (Nasdaq: GTEC) provides counter-terrorism and intelligence data and analysis, as well as water purification and other support systems for deployed troops. Although it only trades in the low teens, GTEC is expected to earn $0.97 per share this year and $1.21 next year. Its projected annual five-year growth rate is 17.5%.
With the United States set to combat terrorism for years to come, it should provide long-term growth opportunities for the companies mentioned above.
Not only that, it’s my hope that their products, and others like them, enable more moms to carry light reading through our airports instead of folded flags.
To all our military personnel – past and present – thank you for your service.