Is the bull market back?
The S&P 500 gained nearly 3% in five days last week, but a lot of stocks did even better than that. Sirius XM
Simply put, there's an awful lot of optimism on Wall Street. Even defense-industry investors are starting to feel the love. Last week, shares of two of our defense portfolio companies, and several other bigwigs of the defense world, struck new 52-week highs: Boeing
So while we're still trailing the market, take heart, defense investing Fools. Last week was a good week for us all:
|
Company |
Starting Price* |
Recent Price |
Total Return |
|---|---|---|---|
|
General Dynamics |
$50.97 |
$72.61 |
42.3% |
|
Raytheon |
$41.74 |
$55.54 |
33.1% |
|
Lockheed Martin |
$77.07 |
$77.21 |
0.2% |
|
AeroVironment |
$29.96 |
$25.35 |
(15.4%) |
|
iRobot |
$11.49 |
$17.50 |
52.3% |
|
Force Protection |
$4.57 |
$5.33 |
16.6% |
|
AVERAGE RETURN |
|
|
21.5% |
|
S&P Spyder |
$87.28 |
$111.14 |
27.3% |
|
DIFFERENCE |
|
|
(5.8) |
Source: Yahoo! Finance.
*Tracking began on July 10, 2009. Portfolio is equal-weighted, with "recent price" being set at market close on the Friday preceding publication, and adjusted for stock splits and dividends.
Which headlines drove these stocks higher last week? I can think of a few.
MRAPS and PackBots and LCS, oh my!
General D landed at least three major revenue-makers last week: a $387 million contract to provide training systems to the U.S. Army; $227 million more to build 250 mine-resistant, ambush protected vehicles (MRAPs) for the Marines; and then $29 million more to upgrade the suspensions on MRAPs already built by rival armored-truck maker Oshkosh.
The General wasn't the only recipient of Pentagon largesse, however. Navistar landed a deal to build 1,050 of its "MaxPro Dash" MRAPs for the Marine Corps. And tiny robot maker iRobot scored an impressive Q4 win with an earnings report chock-full of earnings from its military "PackBot" program.
Meanwhile, as its compatriots were busy dominating the field of land warfare, Lockheed Martin took to sea with a real stunner of an announcement. In an industry where meeting budgets is almost as unpopular an idea as getting things done on time, Lockheed somehow managed to get its prototype Littoral Combat Ship prepared for duty two years ahead of schedule.
The vessel, dubbed USS Freedom, set sail from Naval Station Mayport in Florida last week for parts unknown, but believed to be somewhere in the Southern Command. (That encompasses a territory stretching from South America up to Central America and into the Caribbean. I'm guessing the Navy will be putting Freedom through its paces on drug interdiction and border security missions initially.)
That's one LCS down, 54 more to go.
The big story is Boeing
Of course, in the grand scheme of things, these stories all pale in significance to what's happening for Boeing. As its archrival weakens, Boeing is poised to win a major contract that could reward its shareholders for years to come.
Last week, the European coalition of nations funding EADS' new A400M military transport rejected that company's appeals for a massive aid program. EADS claims that requirements imposed upon it by the buyer nations have forced it into a $7.1 billion hole. The buyers insist EADS bears the blame -- and must bear much of the cost.
Negotiators say the most EADS' counterparties can offer is $4.8 billion in aid for the beleaguered plane builder -- more than one-third of that in export "guarantees" – which could be classified as a loan. The upshot for Boeing investors is that EADS expects to lose as much as $2.3 billion more on this project, even if it receives the loan package -- atop the $3.3 billion in losses it's already booked.
In contrast, Boeing's sitting pretty right now as we come down to the wire on the new KC-X Refueling Tanker project. The Pentagon has promised to release its final request for proposals this week. With EADS and its U.S. partner, Northrop, threatening to sit out the competition unless they're granted significant concessions, Boeing could win this race in a walk.
Foolish takeaway
Worst case: Northrop and EADS eat crow and bid anyway -- on a contest the latter seems to believe it's fated to lose. It's hard to imagine how this can be anything other than great news for Boeing shareholders.
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