Defense News Roundup: Another Slow Week at the Pentagon

Here's our weekly rundown of the major stories in defense spending.

Feb 9, 2014 at 6:45AM

The U.S. military has a reputation as a somewhat secretive organization. But in one respect at least, the Pentagon is one of the most "open" of our government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open on its website.


So what has the Pentagon been up to this week?

Actually, very little. DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2014. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). Spending has been exceedingly light this year, though, with the Pentagon awarding only $13 billion in contracts year to date -- less than half the budgeted amount. This trend continued into the most recent week, with contracts amounting to "only" $2.6 billion.

And what did the generals get for their (read: "our") money?

"Virginia" is for submarine lovers ...
Defense contractor General Dynamics (NYSE:GD) claimed the week's single biggest award on Tuesday, when the Navy gave the company $520 million in additional funding. General Dynamics needs the funds for the purchase of long lead-time parts and materials required to build the next four nuclear attack submarines on its construction schedule: the Virginia-class boats SSN 794, SSN 795, SSN 796, and SSN 797.

... but Boeing is for submarine hunters
At the same time the Pentagon was awarding General Dynamics funds to build our submarines, it also exercised an option to have Boeing (NYSE:BA) design instructional courseware and to support training in the use of its new P-8A Poseidon submarine hunting jet aircraft. Boeing's Poseidon contract received an additional $22 million in funding to assist with this work through December 2016.

General Atomics reaps profits
There weren't a whole lot more contacts of any real size awarded last week. But of those that were awarded, privately held General Atomics claimed two. Both funding work on the MQ-9 Reaper drone -- specifically, the purchase of 38 armed extended-range Reapers for the Air Force, and the provision of software upgrades for Reapers operated by the Air Force Special Operations Command. Total value: $134 million.

Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's move on to one contract that may not yet be incorporated into defense contractors' stock prices.

On Tuesday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to sell the government of Iraq a set of electronic equipment sufficient to outfit four Iraqi military airbases -- Tikrit, Al Basra, Al Kut, and Taji -- with new Air Traffic Control and Landing Systems. DSCA puts the value of these equipment sales at $700 million.

This contract hasn't been officially announced. Indeed, DSCA says it doesn't even know yet who will serve as principal contractor on it. (Although we note that Raytheon (NYSE:RTN) is the company responsible for building the AutoTrac II navigation suites and the ASR-11 Airport Surveillance Radars that would be integral to setting up the air traffic control and landing systems, and would be a logical choice.)

For now, few investors are factoring this multi-hundred-million dollar contract into their valuations of the company. Very few people know about it -- except that now, you do.

Thanks for all the great stock tips, Pentagon!
You don't always have to look far to find good investments. Sometimes, profiting from our increasingly global economy can be as easy as investing in your own backyard -- and the Pentagon's helpful habit of publishing all its contracts daily as they're awarded certainly makes that easier. Want to find more "easy to understand" investments? Read The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics and Raytheon. Try any of our Foolish newsletter services free for 30 days. 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.

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.

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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.

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