Chasing Value: Raytheon creates a real 'ray-gun'

As a vital defense R&D company always on the cutting edge, I figured it to be a safe bet. However, given the mess at all of our major airports I felt its technology would always be in demand.

Now, as part of the missle defense program and to detonate road side bombs from a safe distance in Iraq, the ray gun, or "directed-energy weapon," can be deployed from 300 feet away. The system has been named Zeus and the military intends to expand its use to include blowing up incoming shells and small rockets with laser beams. The targets are tracked by radar or, if they are rockets, by infrared sensors.

This defense contractor is basically a tech company trading at a low P/E, P/S and book value while sporting almost a 2.5% yield. Cash and short-term investments have increased for five years running from $661 million to $2.66 billion while reducing outstanding long-term debt from $7.38 billion five years ago to $2.27 billion through the end of last year. 2008 earnings have been up and shareholder equity and cash continue to grow as well.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of RTN.