Readers of this space know that selected defense contractors are my preferred plays, growing U.S. economy or not. (But let's hope it's a growing U.S. economy). And the reason for the defense contractor bullishness is obvious enough. The geopolitical climate can change, of course, but it looks like defense, national security and anti-terrorism efforts will remain at the top of the U.S.'s concerns, for the foreseeable future.

Further, when one can combine a defense contractor with an industrial play, including commercial aviation, the potential exists for superior return on equity. And with the above in mind, United Technologies is worth a review.

United Technologies (NYSE: UTX) is one of those handful of stocks in which you can buy 200 shares or 50 shares for your child's college fund, and then look back on it in 10 years and be very glad you did.

Here are some attributes: Leadership position in high-value-add sectors, substantial defense contracts, infrastructure/capital improvement businesses, technological leadership, diversification and operational balance, economies of scale, massive amounts of engineering talent, long history of steady earnings growth and dividend growth. The Reuters F2008/F2009 EPS consensus estimates for UTX are $4.88/$5.45.

For years, analysts tried to agree on what constituted the essence of United Technologies -- the bread-and-butter division, if you will -- and then it dawned on one reviewer that UTX doesn't really have just one, which of course, is the essence of United Technologies' strength.

Consider these divisions, with their revenue contribution, and accompanying business responsibilities:

• Pratt & Whitney (23%), is a major supplier of jet engines for commercial aviation, general aviation and military aircraft.
• Carrier (28%), is the world's largest maker of commercial and residential heating/air conditioning and ventilation systems.
• Otis (22%), is the world's largest maker of elevators and escalators.
• Hamilton Standard (10%), is a leading supplier of aerospace and industrial products.
• Sikorsky (7%), is one of the largest manufacturers of military and commercial helicopters.

The risks? To be sure, the U.S. and/or a global economic slowdown will hurt UTX's results, and these recent macroeconomic concerns have affected UTX's shares -- the stock has dropped about $9 from $82 to the $73 range. The stock's p/e of 16 is still not cheap, but the argument here is that the risk/return ratio is more than fair, given the company's characteristics.

The First Call mean rating for UTX is: Buy [17 firms]. Mean 2008 target: $84.00 [high: $87, low: $78.00].

In sum, the argument for UTX is strong, unless of course you envision a world and Asia economy without elevators, air conditioning, heating systems, commercial airlines and helicopters.

Stock Analysis: United Technologies is a moderate-risk stock not suit-able for low-risk investors. Investors with an investment horizon longer than two year should be rewarded from UTX's shares. Sell / Stop Loss if you were to buy shares in this company: $53.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.