On tonight's MAD MONEY on CNBC, Jim Cramer said that he thinks defense and aerospace is becoming the seventh bull market and that we spend more than anyone else by far on defense. He feels the Democrats would spend a lot on defense to look strong. Cramer chose Lockheed Martin Corp. (NYSE: LMT) last week as a pick, and he really likes Raytheon Co. (NYSE: RTN) because it is the most leveraged name to defense spending, and because it is the cheapest -- according to his growth rate over P/E analysis. He likes its growth, debt retiring, and share buybacks. The first play is Alliant Techsystems (NYSE: ATK) as the largest bullet manufacturer and is big into projectiles of all sorts. Alliant reports Thursday, so Cramer noted to only put on a half position so you don't have the earnings exposure as bad.
Alliant Techsystems has been one of my favorite plays in the sector for longer than I can recall. I even had it as a takeover candidate for a BAIT SHOP stock play, meaning it's potential takeover bait. The largest bullet manufacturer angle makes the company quite predictable, and its propulsion systems for space rockets and weapons systems gives it steady juice. But the secret and test propulsion business could be worth an unbelievable amount. Type in X-43A on a web search or go check it out on Space.com and see what comes up. That's theirs, and the future value for this technology could be astronomical.
Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in the companies he covers.
Cramer's defense stocks ... actually, war stocks
Posted Jul 31st 2007 7:15PM by Jon Ogg
Filed under: Analyst reports, Lockheed Martin (LMT)
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Reader Comments (Page 1 of 1)
8-01-2007 @ 5:13AM
Michael Schneider said...
A pullout from Iraq would hit Alliant Techsystems more than some of the defense companies because military spending on basics like bullets is largely due to Iraq. The bigger defense companies that Jim Cramer likes would fare better because even if the war winds down or we pull out the military would shift from basic needs to more elaborate modernization projects. For now, nothing will matter much as it looks like the market will take many stocks down with it. However, there will be bargains emerging and he is right that some of the defense companies are already cheap because of fears of the Democrats.
A synopsis of a really good and really recent Chicago Tribune article on the defense industry is available at (green label, top) at http://www.Barreloworld.com. Also at http://www.Barreloworld.com is a free list of 32 defense "Bull Sign" stocks from lightning rounds on the Mad Money show since its start.