Gadling's resident pilot explains what life in the cockpit is like

AOL Money & Finance

McCain stock: Defense play with General Dynamics (GD)

This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.

"The GOP is traditionally known as the party that spends more on defense; thus, if McCain wins the election, one stock to benefit would be defense firm General Dynamics (NYSE: GD)," says John Reese, editor of Validea, which follows the strategies of "legendary" investors such as Warren Buffett and Peter Lynch.

"While McCain has talked tough about reforming the defense budget, he has also pledged to increase the size of the military, modernize the armed services, and push hard for strong missile defense systems -- all of which require serious spending.

"As a major producer of battle tanks and assault vehicles, armaments and munitions, battleships and nuclear submarines, and military information technology systems, this Virginia-based firm is thus likely to have quite a bit of work on its hands during a McCain presidency.

"Just as importantly, General Dynamics' finances and fundamentals are very strong, earning approval from both my Peter Lynch and Warren Buffett-based Guru Strategies -- computer models that are each based on the approach of a different investing great.

"Because of its moderate 18.14% long-term growth rate and huge annual sales of $28.7 billion, General Dynamics is considered a 'stalwart' by my Lynch strategy, the type of large, steady firm that Lynch found offered protection during downturns or recessions.

"Two big reasons my Lynch model is high on this stalwart: its yield-adjusted P/E/Growth ratio of 0.75, which signals that the stock is a bargain right now, and its 18.79% debt/equity ratio, a sign that GD has the conservative financing Lynch liked to see."

My Buffett-based model, meanwhile, likes General Dynamics' consistency. Over the past decade, its EPS have declined just once, rising from $1.46 to $5.10 in that time.

"The company's annual return on equity -- a figure Buffett used to find firms with the 'durable competitive advantage' he famously prizes -- has been at least 16.4% every year.

"GD has also retained $22.30 in per-share earnings in the past decade while increasing EPS by $3.64, showing it can earn investors a 16.3% return on the earnings it keeps. That's a sign of the strong management Buffett is also known to look for."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

Related Posts

Reader Comments (Page 1 of 1)

Add your comments

Please keep your comments relevant to this blog entry. Email addresses are never displayed, but they are required to confirm your comments.

When you enter your name and email address, you'll be sent a link to confirm your comment, and a password. To leave another comment, just use that password.

To create a live link, simply type the URL (including http://) or email address and we will make it a live link for you. You can put up to 3 URLs in your comments. Line breaks and paragraphs are automatically converted — no need to use <p> or <br /> tags.

Symbol Lookup
IndexesChangePrice

Last updated: November 22, 2008: 12:25 PM

BloggingStocks Exclusives

Hot Stocks

BloggingStocks Featured Video

TheFlyOnTheWall.com Headlines

WalletPop Headlines

AOL Business News

Latest from BloggingBuyouts

Sponsored Links

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

BloggingStocks Partners

More from AOL Money & Finance