In 1991, Operation Desert Storm pitted state-of-the-art M1 Abrams tanks against Iraq’s Soviet-made tanks from the 1950s to the 1970s.
It wasn’t even a fair fight.
Not only were these tanks old, but their technology was decades out of date.
Combined with GPS technology and advanced targeting systems, U.S. forces obliterated Iraqi troops and tanks.
History has repeatedly shown us how military technology can tilt the scales of war in favor of one side.
- American Civil War — Ironclad warships like the USS Monitor gave the Union Navy a technological edge over the Confederate Navy’s wooden ships.
- World War II — The Allies’ ability to crack Axis codes and the use of radar for detecting enemy aircraft played a crucial role in various theaters. And we can’t forget the atomic bombs used against Japan in 1945 to end the war.
- World War I — The introduction of tanks by the Allies and the widespread use of machine guns changed the nature of trench warfare, providing a technological edge.
The war in Ukraine and the latest attack on Israel seem to have finally awoken our collective consciousness.
We cannot take our technological advantage for granted.
Israel’s Iron Dome, the pinnacle of defense shields, couldn’t account for a low-tech assault.
The advanced weaponry provided to Ukraine, from unmanned aerial drones capable of sniffing out enemy movements to High Mobility Artillery Rocket Systems, allowed a drastically undertrained and understaffed force to not only fend off Russia but slowly gain ground.
Yet, the sheer size of the Russian military threatens to thwart Ukrainian and NATO efforts to push back invading forces.
At home, our own supply of critical weaponry sits at its lowest levels in decades.
This leads to one natural conclusion — investing in defense stocks makes a whole lot of sense.
Companies like Lockheed Martin (LMT) and Raytheon (RTX) saw shares soar after last weekend’s attacks on Israel.
However, you can’t take these knee-jerk moves as signs of investor confidence.
We aim to break down several specific investments in the sector, highlighting who supplies what to the United States and our partners.
Make sure to stick around to the end because we’ll introduce you to an investable technology that aims to revolutionize the way we protect our soldiers.
Lockheed Martin: A Defensive Cornerstone
Lockheed Martin (LMT) has long been a cornerstone in the defense industry.
As a key player in aerospace and security, it’s at the forefront of advanced technology systems, products and services.
Its reach extends globally, with Ukraine and Israel among the countries utilizing its cutting-edge military technology.
In response to recent conflicts, Ukraine received a significant boost in its defense capabilities with the nearly 10,000 Javelin anti-tank missiles from Lockheed Martin and Raytheon.
The Javelin is no ordinary missile. It’s a fire-and-forget missile with lock-on before launch and automatic self-guidance. This means once it’s launched, it doesn’t need any further assistance to find its target, providing a critical edge on the battlefield.
Here’s the kicker — Lockheed doubled its production to produce 4,000 Javelin missiles annually.
That means we’re at least two years from replenishing our stockpiles.
That’s on top of the company’s recent memorandum with Poland to produce Javelin anti-tank weaponry.
From a financial standpoint, the company is cheap, trading at 16x earnings and 13x cash with a healthy 2.75% dividend.
With a backlog that stretches years into the future, the only thing that can hamper Lockheed’s future is itself.
Defense stocks like Lockheed Martin can offer substantial returns, particularly in the light of ongoing global conflicts.
However, they also carry risks. For those looking for a more balanced approach, consider the iShares U.S. Aerospace & Defense ETF (ITA).
This exchange-traded fund (ETF) gives investors exposure to a broad range of U.S. companies involved in manufacturing commercial and military aircraft and other defense equipment.
Instead of just owning one defense stock, you spread your investment across multiple defense-related companies, reducing the risk associated with single-stock investments.
Yet, you still get niche exposure to the military and defense theme, which is likely to continue growing amidst escalating geopolitical tensions.
Defending Our Soldiers of the Future
We face a two-fold threat to our future defense: supply shortages and evolving technology.
Despite being three years past, the supply chain disruptions from the pandemic still continue to plague our military and its suppliers.
Not only do we need more production, but we need better equipment.
As George Gilder discovered, one technology may cover both simultaneously.
He’s been researching a material that promises to make Kevlar vests stronger, cheaper and lighter.
Yet, that same material can be added to the manufacturing process of weaponry, from tanks to missiles, making them stronger and easier to produce.
But the best part is that this technology of tomorrow isn’t limited to the defense sector.
Its applications extend to health care, consumer products and beyond.
And it’s 100% investable.