Investment Strategy in the 2022+ Economy:

Defense Contractors

If you’re looking for where to re-invest your money, as the economy changes rapidly, and the biggest stock-market crash in 2022 since the Great Depression’s 1929, I’m considering defense spending.

This may be against your moral code, investing in war. But your country is deeply invested in the war machine, and I’ve been researching who the biggest defense contractors are, and whether now is the time to invest, or whether to wait. (Learn now, consider investing later, is my general conclusion.)

Why would you learn who the publicly traded, strongest defense contractors are? Because not only are we at the brink of war, and in a cold war against both China and Russia, with unrest in the South China Sea–we’re also funding the Ukrainians against Russia, severely depleting our own war arsenal.

And there are mobs in the street, and people being executed for advocating for women’s rights, in Iran, and unrest in Syria and the Middle East at large, where we depend on this region for the oil and gas our economy needs, and our current administration is making oil and gas investment next-to-impossible.

Many of our supply chains are threatened, and we’ve invaded other countries and sent our young people abroad, for war–for far less than the aggressions against the U.S. we are currently seeing.

Our own military arsenal is becoming severely depleted. Lloyd Austin of the Department of Defense recently stated that our country cannot handle both the Russia/Ukraine War AND a China/Taiwan war.

Yet the U.S. relies on Taiwan for sophisticated microchips, and has historically backed Taiwan, and China has recently all but stated openly that they believe their window to take Taiwan is in the very near future.

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So, our country needs to rebuild our defenses. Recently, the estimate is that we will spend $50B per year, through 2030.

I’m not suggesting you invest in defense contractors to become filthy rich, nor am I giving financial advice, as I’m just sharing my own research.

But rather, for stability and safety of our assets, one thing that is clear is that the U.S. is going to invest deeply in defense spending in the next decade.

You can invest in an ETF, a basket of companies, rather than one stock, to diversify your investing. Defense contracting ETF’s include (in order of MotleyFool’s ratings):

1. iShares U.S. Aerospace & Defense ETF (ITA: NYSE)
2. SPDR S&P Aerospace & Defense ETF (XAR: NYSE)
3. Invesco Aerospace & Defense ETF (PPA: NSE)
4. ARK Space Exploration & Innovation ETF (ARKX: NYSE)
5. Direxion Daily Aerospace  & Defense Bull 3X Shares (DFEN: NYSE)
6. SPDR S&P Kensho Future Security ETF (FITE: NYSE)

But the following are other defense contractors with a long, strong track record–and just as examples, I share what I find when I search for “Is [insert stock code] a good buy?” (Also check the date of the stock analyst articles you find to see if they’re current.)

I look at the current price in my eTrade account, relative to its price over the last year–both of these tasks will take you 90 seconds.

Raytheon (RTX: NYSE): Patriot missiles, and lots more. Most analysts think it’s a strong buy, and none in a survey of analysts suggest selling it.

Lockheed Martin (LMT: NYSE): The stock has performed well the last five years, even with stock market plunges, but this one might be good to keep an eye on, for a major market correction when prices are lower.

Boeing (BA: NYSE): We think of them as commercial airliners (indeed 57% of their business), but they’re also deep in defense contracts. Analysts, however, think it may be overvalued, and I think Americans will be flying less, due to the SDG goals, so that majority of their revenues being related to commercial airliners may not help stock price.

Howmet Aerospace (HWM: NYSE): In Pittsburgh, they make bulkheads for fighter planes, and machining for many of the defense contractors. Wall Street analysts predict it will hit $40.50, but trades at $38.70 now, so I may place a buy order for $35 or less.

Textron (TXT: NYSE): They make helicopters and supply jets to the Army. Research shows analysts saying it may be undervalued, making it a good buy–plus, it pays a dividend. Sometimes it’s the less-sexy companies with a smaller market cap that make the best investments.

I am not a financial advisor, and this is not financial advice. I’m just sharing with you some of the simple research I do, before investing in a stock. And unlike financial advisors, I don’t make any money, by telling you about my research. In fact, I can truthfully state that I’ve not invested in any of these stocks. Not yet.

I was out of the stock market for a long time, but diversification, and finding good values in the stock market, now that most prices have come down, is the way to go. I’m watching for the next market correction, when the stock markets take a dive, before I invest in this sector.

Many stock market analysts think more, very significant, stock market corrections, will occur in the next two years. So if you’re like me, now may be a time to start researching, rather than buying just yet. FOMO isn’t a good reason to buy.

You certainly aren’t the first person to consider that defense contracting may be a big growth industry in the near future, so their price may be somewhat overvalued. Many of these stocks are good “hold” options these days, but I’d want to see a price dip before buying.

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