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With geopolitical tensions showing no signs of abating in the near term, many investors are starting to rethink defense stocks.
On Saturday, we asked our analysts: Which defense stock is the best short term investment right now? Question of the day He is: any Are defense stocks the best long term investment?
Seeking Alpha analysts Dhiren Pichai, Jerry Wang of JR Research, Deep Value Ideas, and Leo Nielsen gave us their picks.
Two monasteries were sold: Long term, I still like Lockheed Martin.New York:LMTThe stock is not cheap compared to its average valuation, but the company has a strong product portfolio coupled with strong returns to its shareholders in the form of dividends and share buybacks.
Jerry Wang of JR Research: I prefer RTX (New York:RTX) as a long-term investment, given its well-diversified exposure to commercial aerospace and defense contracting businesses. It also provides a more comprehensive setup to mitigate defense concentration risks.
Thoughts of deep value: RTX (RTX) is clearly a company. The company is highly diversified in commercial aerospace and defense and has a very strong track record. With its unique positioning with the GTF Advantage engine, RTX (RTX) benefits from strong and increasingly predictable long-term service revenues while maintaining operational flexibility. I would therefore expect it to report only a modest hit to earnings even in a major recession, so it should be able to continue to pay and grow its dividend in such an environment.
Leo Nelson: In the long run, I like most of the big defense companies. In addition to L3Harris (New York:LHX) and RTX (RTX), I love — and own — Lockheed Martin (LMT) and Northrop Grumman (New York Stock Exchange: Night), two companies with big orders in missile defense, next-generation aviation, communications, and other programs. Northrop Grumman also has a major drone program, including submarine drones, which are in development, and advanced surveillance drones that are selling like hotcakes in this defense environment.
Additionally, I like smaller players like AeroVironment (NASDAQ: AFAF), which is innovating in the small drone environment, an industry that has revolutionized modern warfare in Ukraine.
Overall, I’m bullish on this industry, and I think it’s hard to go wrong with any of the “big companies.”