Great Value In Defense Stocks

March 2, 2009 at 5:45 pm  ·  Category: Fundamental Analysis, Stocks

Defense stocks have been getting crushed on the fear that Obama is going to cut back on defense spending.  This has created some terrific opportunities.

Take a look at this table of five of the largest US defense contractors:

Company                        Market Cap  Share Price    2009 EPS*  Multiple Yield

Lockheed Martin (LMT)   $24 bil          $59.96        $7.05-$7.25    8.4        3.8%

General Dynamics (GD)    $16 bil          $41.05       $6.70-$6.75    6.1       3.4%

Raytheon (RTN)            $16 bil          $37.71        $4.45-$4.60       8.3       3.0%

Northrop Grumman (NCO) $12 bil      $35.45        $5.15-$5.40    6.7        4.5%

L-3 Communications (LLL) $8 bil       $63.56         $7.12-$7.32    8.8        2.2%

* 2009 EPS are company forecasts

Those are some pretty attractive valuations in my opinion.  The dividends are nice too.  Earnings from these businesses should be pretty stable regardless of the economy.

Disclosure: Top Gun has no position in any of the stocks mentioned in this post – for now!

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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