Jobless recession? What jobless recession?
News that the nation's unemployment rate spiked to 10.2% seems unable to dent the market's rally, as the S&P continued climbing in early morning trading. Investors seem more focused on Cisco's (NASDAQ:CSCO) strong earnings report and bullish statements about the economy yesterday morning, bolstered by good news out of Starbucks (NASDAQ:SBUX) later in the day.
Granted, not everyone's grinning this week. In particular, Research In Motion (NASDAQ:RIMM) stock seems stuck in neutral, while Garmin (NASDAQ:GRMN) got thrown for a 15% loop Wednesday. Both stocks seem to be suffering still from fears that the new Google-Motorola Droid phone will upset their strong positions in smartphones and GPS, respectively.
Speaking of which, fellow Fool Anders Bylund recently outlined a plan by Raytheon (NYSE:RTN) to use Google's off-the-shelf Android technology to build its new "RATS" battlefield communication system. Raytheon's stock is performing nicely this week -- and it's not the only defense shop to be breathing a sigh of relief after the disaster that was last week.
Defense counterattacks
After getting just mauled over the course of the last two weeks, things have turned around. We're still lagging the rest of the market by a sizeable margin, I'll grant you, but the gap has narrowed:
|
Company |
Starting Price* |
Recent Price |
Total Return |
|---|---|---|---|
|
General Dynamics |
$51.54 |
$65.39 |
26.9% |
|
Raytheon |
$42.27 |
$47.08 |
11.4% |
|
Lockheed Martin (NYSE:LMT) |
$78.28 |
$72.86 |
(6.9%) |
|
AeroVironment |
$29.96 |
$27.96 |
(6.7%) |
|
iRobot |
$11.49 |
$14.10 |
22.7% |
|
Force Protection |
$4.57 |
$4.53 |
(0.9%) |
|
AVERAGE RETURN |
|
|
7.7% |
|
S&P Spyder |
$88.17 |
$106.85 |
21.2% |
|
DIFFERENCE |
|
|
(13.4%) |
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. Minor differences due to rounding.
Extra! Extra! Read all ... oh, never mind
What's got investors so excited about defense stocks all of a sudden? Search me. Fact is, after unloading on the market with both barrels the past two weeks, defense contractors seem to have run low on ammo. Precious little news was announced this week, although the news we did get, did sound good.
On Monday, Lockheed Martin landed a $293 million contract to provide the Pentagon with "network operations maintenance, management, and security support." Such un-outsourcable, sensitive IT work will become increasingly important to maintaining Lockheed's revenue streams as the Obama administration curtails spending on "sexier" hardware projects like the F-22 Raptor.
Similar non-standard defense work seems likely to boost the fortunes of companies marching to the front of robotic warfare. Chief of Naval Operations Admiral Gary Roughead was quoted earlier this week promising to accelerate development of unmanned combat aircraft (UCAS), and similarly unmanned robotic submarines (AUV) -- good news for Northrop Grumman, which is heading up the UCAS project, and for iRobot, which has a hand in AUV development.
More guns, fewer lawyers
And speaking of acquisitions -- and government officials -- the very best news of the week came from Admiral Roughead's superior officer, Pentagon acquisition chief Ashton Carter: Simply put, the Pentagon is sick and tired of its suppliers' whining, and wants them to cut it out.
Tired of being peppered with appeals of every contract it issues, the Pentagon has drawn a proverbial line in the sand, demanding an end to frivolous lawsuits by losing bidders. The message seems to be gaining traction, too, as Boeing (NYSE:BA) very conspicuously declined to appeal the recent award of a military refueling tanker contract to rival Northrop Grumman.
Will the rest of the military-industrial complex fall in line behind Boeing? We polled Fool readers for their thoughts earlier this week, and believe it or not -- the voting is still too close to call! If you haven't had a chance yet, click over to the article now, and tell us what you think will (and should) happen.
