And so the week draws to a close -- and what a week it was!

In macro news, the Dow reclaimed 10,000 (but where do we go from here?) Controversy raged over whether the H1N1 flu vaccine will kill you -- and whether we've got enough of the stuff to go around. Meanwhile, health-care reform got a shot in the arm from a positive Senate vote.

At the individual company level, MasterCard (NYSE:MA) picked up an upgrade. Even with consumers possibly cutting back on purchases, there's hope that a shift from cash to plastic payments will benefit the company in coming years. Also, while positive earnings have shown the impressive measures companies are taking to increase revenues and save costs, Pepsi (NYSE:PEP) reminded us that boneheaded moves are still going on in corporate America. Meanwhile, among our targeted circle of defense contractors, it was "all quiet on the Western front."


Starting Price*

Recent Price

Total Return

General Dynamics




Raytheon (NYSE:RTN)




Lockheed Martin (NYSE:LMT)












Force Protection








S&P Spyder








Source: Yahoo! Finance.
*Tracking began on July 10, 2009. Portfolio is equal-weighted, with "recent price" being set at market close on the Thursday preceding publication, and adjusted for stock splits and dividends.
**Adjusted for dividends.

Winners and spinners
General Dynamics turned in the strongest performance this week, coasting on the strength of last week's bullish contract wins. In contrast, Force Protection shifted into reverse -- so perhaps investors are reconsidering the records of the analysts who've ballyhooed its prospects lately.

If so, these investors might want to take a closer look at the company that beat out Force for the M-ATV contract back in June. Right now, Oshkosh (NYSE:OSK) sell for less than they fetched last week -- but the news has been anything but bad. On Monday, Oshkosh locked down a $408 million contract to produce more of their armored beasts. That brings its tally to 5,219 vehicles on order, valued at nearly $2.8 billion -- and this may be only the beginning.

As we also learned Monday, Oshkosh plans to take its M-ATV show on the road. In cooperation with Israel's Plasan, they're shopping M-ATVs and SandCat armored cars "down under," hoping to win part or all of an expected 1,300 vehicle-order under Australia's Protected Mobility Vehicles-Light program. No word yet on how much a win here could be worth, but we'll keep you posted.

In other news ...
Really, there isn't much other news to report. By and large, both small and large defense contractors are keeping their secrets close to the vest this week. Earnings season has begun, and I suspect the plan is to keep powder dry for later -- a little extra gasoline to add fuel to the fire after an earnings beat, or contrariwise, distract disaffected investors if someone must report bad news.

Next week alone, we should be hearing from:

  • Tuesday: United Technologies (NYSE:UTX) and Lockheed Martin
  • Wednesday: Boeing (NYSE:BA), iRobot, Northrop Grumman, and FLIR Systems
  • Thursday: Raytheon
  • Friday: Honeywell

The following week will bring earnings news from L-3 Communications, Textron, Ceradyne, and General Dynamics -- and November will feature reports from Oshkosh and Rockwell Collins.

So long, and thanks for all the fish
Actually, though, there is one bit of news worth noting in the sector, even pre-earnings. As it turns out, there will be last hurrahs in the coming quarters from several of our defense contractor executives.

Boeing Capital President Walt Skowronski has announced he will retire at year-end, as will United Tech Chairman George David. These execs join Textron CEO Lewis Campbell and Boeing Commercial Airplanes President Scott Carson in a long line of defense industry veterans headed for the exits this year.

Now, were I a conspiracy-minded Fool, I might suspect that this has ominous implications for the industry. When corporate fortunes are riding high, bosses are rarely eager to jump ship. In contrast, once the boat starts taking on water -- let's just say that the allusion to a behavior pattern famous among members of genus Rattus springs to mind.

Foolish takeaway
Disconcerting as the trend appears, it's hardly exceptional in the corporate world, where we've seen a marked increase in CEO turnover. According to Booz Allen, the period from 1995 to 2006 saw annual CEO turnover grow 59%, and the average corporate top-boss now occupies his corner office for less than eight years before moving on.

I'm not saying this means the defense industry isn't in for tough times -- it is. And I expect the rash of defense exec departures does have something to do with near-term prospects. Our task as investors, though, is to look past these near-term difficulties, and see the opportunities in the low stock prices that result. Right now, tough times have yielded the chance to buy high-quality companies defense companies at a discount to the market's run-up.

My advice: Don't let this opportunity pass you by.

Fool contributor Rich Smith likes a lot of these stocks so much that he "bought the company" -- Force Protection, Ceradyne, Boeing, and AeroVironment to name a few. AeroVironment and iRobot are Motley Fool Rule Breakers recommendations. FLIR Systems and General Dynamics are Motley Fool Inside Value recommendations. Rockwell Collins is a former Inside Value recommendation. Pepsico is a Motley Fool Income Investor pick. Why do we tell you this? Because The Motley Fool has a bulletproof disclosure policy, that's why.