You should have took the strength this morning in the market as a chance to sell the things Jim pointed out as areas of crisis yesterday. The banks, homebuilders and brokers in general were named. The worst case keeps playing out. Chipotle Mexican Grill, Inc. (CMG) was good today but General Cable Corporation (BGC) and Buffalo Wild Wings (BWLD) were not. You should be selling the bad and slowly redeploying into the down market. There is a bull market in defense with aerospace being a part and in the next 3-6 months the good stocks will keep moving higher. Jim called defense the 7th wild bull market. What happens is Congress decides it will pour money into an area and that becomes the place to be. Agriculture was cited as a recent area, and the market has been less than stellar recently but Bunge Limited (BG) and Monsanto Company (MON) going higher today. On the front page of a number of national paper we were shown an article about how our government is going to spend billions to help allies in the Middle East with $20 billion going to Saudi Arabia and $30.4 billion going to Israel among others. Democrats will continue the spending as well if they take office because they do not want to look weak. Right now 40% of the worlds defense spending comes from the United States and considering we are a war machine we should look to make some money off of it. Adding defense to your portfolio was recommended with individual sectors soon to be on a rampage. Lockheed Martin Corporation (LMT) and The Boeing Company (BA) are both stocks Jim likes with Northrop Grumman Corporation (NOC) liked but a bit less. Today we were given two defense contractors that look like great plays. Three criteria were given in picking winners here: valuation, the cheaper the better; stocks most levered to defense, some stocks like BA have defensive components but the main business is commercial; and US contractors only because we will spend our money here. Alliant Techsystems Inc. (ATK) was the first play today and was previously highlighted on the show. They are a company that deals in lead as they make almost every single projectile the US military uses. We were given various numbers as to why the stock is cheap and a buy along with the great buyback they have in place. 10% being bought back recently which is a unheard of. 36% of business is ammunition, 34% is mission systems (like tanks) and 30% is launch systems (for misseles). The company reports on Thursday so Jim recommended if you do your homework and get in to buy half a position before this and half after they report. Raytheon Company (RTN) was the top defense play from Jim. They are the most levered to defense and the cheapest play. The numbers say they are cheap, and while not all cheap stocks are to be bought RTN is definitely a buy. 96% of sales comes from defense and recently they won 2 of 3 major defense contracts from the government. They have visibility and just raised 4 year guidance. The company has a great balance sheet after selling their aerospace segment also. There was a $9.5 million buyback and they have more money set aside for buybacks. Recently they upped the dividend by 6% as well and most of their cash rolls in the second half of the year. Foreign sales bring in about $5 billion a year also so you get the best of both worlds here. RTN is by far the best play in defense according to Jim.
WATCH DEFENSE VIDEO HERE
WATCH THE CALL TO ARMS VIDEO HERE