When China Threatens, Filipinos Go Shopping for U.S. Warships

One little, two little... eight little Filipino frigates could soon sail into disputed waters.

Jan 17, 2014 at 11:20AM

Uh-oh. It seems that the Japanese (and Taiwanese and Koreans) aren't the only folks getting nervous about the Chinese military buildup in the Pacific Ocean.

On Thursday, DefenseNews.com reported that over in the Philippines, continued incursions into territorial fishing waters have the local navy shopping for used U.S. warships to beef up its fleet. Over the past two years, the archipelagic nation has bought two refurbished American "frigates" for about $10 million apiece. Actually, the vessels, formerly named USCGC Hamilton and USCGC Dallas, and now BRP Gregorio del Pilar  and BRP Ramon Alcaraz, respectively, were classified as Coast Guard cutters when in U.S. possession.


The Philippines' new flagship, the BRP Ramon Alcaraz. Source: Wikimedia Commons.

The threat
In recent months, Chinese naval vessels have been sailing into disputed waters off the Philippine coast, an area that Manila calls the West Philippine Sea but that China insists is really the South China Sea. Already, the increasing numbers of Chinese warships swarming the area have frightened off not just Philippine civilian fishing boats. The overwhelming force being deployed forced the Philippine Navy to back down and cede control of a fishing area known as the Scarborough Shoal to the Chinese.

Scarborough Shoal lies right off the coast of Luzon -- quite literally in the Philippines' backyard (if yards were wet). So you can see why the Filipinos are nervous.

Safety in numbers
At just 3,250 tons displacement and armed with only one cannon apiece (plus a mix of mostly defensive "chain" guns and machine guns), the new Filipino frigates aren't particularly frightening warships. But they are currently the biggest warships in the Philippine fleet. Plus, there's safety in numbers, and the more of them they get, the safer Filipinos will feel.

Nsc Cutter

U.S. National Security Cutter Bertholf (WMSL-750). Source: Wikimedia Commons.

The Philippine Navy now intends to buy two more such frigates... and then two more after that... and then two more after that. Jumping at Secretary of State John Kerry's offer last December to provide the Philippines with $40 million in military assistance, the Philippine Navy says it has bid to buy two more U.S. frigates for its fleet within the next two years, and intends to round out its purchases at about eight vessels (including the two already bought). These will then join the nation's three corvettes, a handful of even smaller warships, in trying to fend off the Chinese threat.

All this spending should be good news for American shipbuilder Huntington Ingalls (NYSE:HII). Huntington built the "frigates" in question, and would be the logical company to tap to refurbish additional vessels prior to their transfer to the Philippines. Huntington is also the company that is building the new Legend-class National Security Cutters that are replacing them at the U.S. Coast Guard.

Result: Selling more frigates to the Philippines won't just make the Filipinos feel more secure. It should make a lot of Huntington Ingalls shareholders pretty happy as well.

Oh, and one more thing
Did we mention that Huntington pays its shareholders a tidy 0.8% dividend yield? Try getting your bank to pay you 0.8% interest these days! While they don't garner the notability of high-flying tech stocks, dividend-paying stocks like Huntington Ingalls are also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.


Fool contributor Rich Smith has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers