Three National Defense Equities to Consider for 2024
Three national defense equities to consider for 2024 feature an exchange-traded fund (ETF) that offers diversification in the sector, a global aerospace giant heavily engaged in space and aviation, as well as a provider of robotics, sensors and software analytics for government and commercial customers.
The three national defense equities to consider for 2024 could be good ways to tap into the rising demand for military products that increasingly are needed due to Russia’s ongoing invasion of Ukraine and the Hamas-launch assault of Isarel that led that country’s defenders that entered neighboring Gaza to pursue and eliminate the threat that took 1,200 lives. The loss of human life has been estimated at hundreds of thousands in Ukraine and more than 20,000 so far in the Middle East.
The market’s surge in recent months and the risk of a recession in 2024 seem to be creating wariness among investors as 2024 starts. For that reason, the three national defense equities to consider are not clear-cut buys right now.
Three National Defense Equities to Consider for 2024: ITA
An exchanged-traded fund suggested by Bob Carlson, the head of the Retirement Watch advisory service, is iShares US Aerospace & Defense (ITA). The fund has the lowest fees among three in the sector that he discussed with me but it has trailed the share price gains of the other two in 2023, Carlson observed.
As a longtime pension fund chairman, Carlson advised that equities that outperform one year often underperform the follow one. The law of averages could work in favor of ITA in 2024.
Bob Carlson, who heads Retirement Watch, answers questions from Paul Dykewicz.
ITA seeks to track the Dow Jones U.S. Select Aerospace and Defense Index. The fund is overweight toward industrials, while underweight toward technology and consumer cyclicals, Carlson said. The fund recently owned 36 securities, and 70.5% of the ETF was in its 10 largest positions.
Top positions in the fund recently were Boeing (NYSE: BA), RTX Corp. (NYSE: RTX), Lockheed Martin (NYSE: LMT), Axon Enterprise (NASDAQ: AXON) and L3Harris Technologies (NYSE: LHX). ITA is up 14.34% during the last 12 months, 19.88% for the last three months and 4.75% in the last month. It also offers a current dividend yield of 1.4%.
Chart courtesy of www.stockcharts.com
Three National Defense Equities to Consider for 2024: Boeing
Chicago-based Boeing Co. (NYSE: BA) recently gained a buy recommendation from BofA Global Research from the investment firm’s defense and aerospace analyst Ron Epstein. Boeing develops, manufactures and services commercial airplanes, defense products and space systems for customers in more than 150 countries.
Boeing is steadily progressing toward its 737 annual target, with 23 deliveries completed since the beginning of December, out of the 24 required to achieve the lower-end of its full-year target of 375-400 737s, Boeing’s aerospace and defense analyst Epstein wrote in a recent research note. He also speculated about the company’s potential return to a production rate of 31 a month.
BofA expects Boeing to generate $15 free cash flow/share by 2026. Epstein boosted his price objective on Boeing to $275 from $250 to reflect a re-rating due to the Fed’s planned interest rate cuts in 2024.
Chart courtesy of www.stockcharts.com
A less favorable outlook for Boeing comes from Michelle Connell, president and owner of Dallas-based Portia Capital Management, LLC. She is cautious on the stock, as I have been since it had two Boeing 737 MAX passenger airline crashes on October 29, 2018, and March 10, 2019, respectively. Those accidents caused the deaths of 346 passengers and crew members.
Despite Boeing announcing new potential airline orders, Connell said she does not think Boeing is “out of the woods” with its safety issues. The Federal Aviation Administration (FAA) has announced it will begin further reviews of Boeing 737 Max planes to determine if they have problems with loose bolts, she added.
The company’s Boeing 737 MAX aircraft have been under scrutiny since before the pandemic and it may take “several years” to put those issues fully in the past, Connell continued.
Michelle Connell heads Portia Capital Management LLC.
Three National Defense Equities to Consider for 2024: AeroVironment
Arlington, Virginia-based AeroVironment (NYSE: AVAV) provides technology solutions at the intersection of robotics, sensors, software analytics and connectivity to deliver vital intelligence information. The company has grown into a global provider of intelligent, multi-domain robotic systems that serve the needs of defense, government and commercial customers.
The Chicago-based investment firm William Blair & Co. rates AVAV as an “outperform” opportunity. The investment firm recently upgraded its view of AVAV as the stock has surged.
Connell expressed concern about AVAV’s current valuation and how much upside it may have ahead after his recent rise.
Since this stock rose more than 44% in the past year, she questioned whether now would be an ideal time to buy shares. Like many good stocks, it showed weakness on the first day of trading in 2024.
“I don’t think this trend is going to end in the near term for several reasons,” Connell said. “While AVAV provides amazing unmanned tech for wars (robotics, drones, etc.), the company’s net operating income, net income, return on equity and return on assets are all negative.”
Plus, AVAV has issued more than $100 million in stock to help fund its growth. However, AVAV did take $50 million of the $100 million and reduce its debt, she added.
Debt requires interest payments, but common stock does not, Connell counseled.
“I would wait for support and buy or average in after AVAV gives up at least 10%,” Connell said. “There will be a great entry point sometime this year. Fundamentals and positive net income will become important again as the euphoria fades.”
Skousen and Woods Like Selected National Security Equities
Two proponents of national security stocks are Mark Skousen, PhD, and seasoned market observer Jim Woods. The pair team up to head the Fast Money Alert advisory service They already are profitable in their recent recommendation of Lockheed Martin (NYSE: LMT) in Fast Money Alert.
Mark Skousen, a scion of Ben Franklin, meets with Paul Dykewicz.
Jim Woods, a former U.S. Army paratrooper, co-heads Fast Money Alert.
Bryan Perry, who heads the Cash Machine investment newsletter and the Micro-Cap Stock Trader advisory service, recommends satellite services provider Globalstar (NYSE American: GSAT), of Covington, Louisiana, that has jumped 43.08% since he advised buying it slightly more than two months ago. Perry is averaging a dividend yield of 11.14% in his Cash Machine newsletter but is breaking out with his hot recommendation Globalstar in his Micro-Cap Stock Trader advisory service.
Bryan Perry heads Cash Machine, averaging an 11.14% dividend yield.
Military Equipment Demand Climbs Amid Wars
The U.S. military faces an acute need to adopt innovation, to expedite implementation of technological gains, to tap into the talents of people in various industries and to step-up collaboration with private industry and international partners to enhance effectiveness, U.S. Joint Chiefs of Staff Gen. Charles Q. Brown Jr. told attendees on Nov 16 at a national security conference. Prime examples of the need are showed by multiple raging wars, including the Middle East and Ukraine. A cold war involves China and its increasingly strained relationships with Taiwan and other Asian nations.
The shocking Oct. 7 attack by Hamas on Israel touched off an ongoing war in the Middle East, coupled with Russia’s February 2022 invasion and continuing assault of neighboring Ukraine. Those brutal military conflicts show the fragility of peace when determined aggressors are willing to use any means necessary to achieve their goals. To fend off such attacks, rapid and effective response is required.
“The Department of Defense is doing more than ever before to deter, defend, and, if necessary, defeat aggression,” Gen. Brown said at the National Security Innovation Forum at the Johns Hopkins University Bloomberg Center in Washington, D.C.
One of Russia’s war ships, the 360-foot-long Novocherkassk, was damaged on Dec. 26 by a Ukrainian attack on the Black Sea port of Feodosia in Crimea. This video of an explosion at the port that reportedly shows a section of the ship hit by aircraft-guided missiles.
Chairman Joint Chiefs of Staff Gen. Charles Q. Brown, Jr.
Photo By: Benjamin Applebaum
National security threats can compel immediate action, Gen. Brown said he quickly learned since taking his post on Oct. 1.
“We may not have much warning when the next fight begins,” Gen. Brown said. “We need to be ready.”
Russia’s Putin Intensifies Attacks Against Ukraine as Western Support to Fund Resistance Wanes
Russia’s President Vladimir Putin has been ordering stepped up missile attacks again civilian targets in many cities in Ukraine. Political reservations in the United States and Europe about continuing to help fund Ukraine’s defense against Russia’s attack have spurred Putin and his followers to speak boldly recently that the Western nations are wearying of supporting Ukraine and that the invasion of Ukraine will expand and potentially move onto other countries.
In a pre-recorded speech at the national security conference, Michael R. Bloomberg, founder of Bloomberg LP, told the John Hopkins national security conference attendees about the critical need for collaboration between government and industry.
“Building enduring technological advances for the U.S. military will help our service members and allies defend freedom across the globe,” Bloomberg said.
The “horrific terrorist attacks” against Israel and civilians living there on Oct. 7 underscore the importance of that mission, Bloomberg added.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Attention Holiday Gift Buyers! Consider purchasing Paul’s inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is great gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for special pricing on multiple-book purchases or autographed copies! Follow Paul on Twitter @PaulDykewicz. He is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper, after writing for the Baltimore Business Journal and Crain Communications.
