Bribery is generally not legal. Campaign contributions, however, are. The difference? I'll let you decide. Here are the top five defense contractors influencing America's politicians in 2013 -- and why it may pay to invest in the defense contractor that's the most "generous."
Why "contribute" to a politician?
Rep. Jim Moran (D-Va.) is a senior member of the House Appropriations Committee, which awards contracts and federal funds. Further, he serves as a Defense Subcommittee member. Consequently, if you're a defense contractor, you probably want Moran on your side. Perhaps that's why he's the top recipient of defense contributions for 2013-2014, according to the Center for Responsive Politics. Moreover, his single biggest contributor, across all sectors, is none other than defense heavyweight Lockheed Martin (NYSE:LMT).
That may sound surprising, but actually, campaign contributions, and lobbying, are a great way to influence everything from the defense budget to securing government contracts. In fact, although the defense sector contributes less money than other sectors, such as health care, it's considered one of the most powerful in politics. For example, in the 2012 campaign cycle, defense contractors contributed more than $27 million to candidates -- $16.4 million went to Republicans, while $11 million went to Democrats. Plus, in 2012, defense contractors spent $132 million lobbying the federal government.
So, who are the biggest "givers" when it comes to politicians and the 2013-2014 cycle? By order of generosity, it goes like this: Northrop Grumman (NYSE:NOC), Lockheed, Raytheon (NYSE:RTN), Boeing (NYSE:BA), and United Technologies (NYSE:UTX). Also interesting? In fiscal 2013, the top six defense contractors that were awarded prime contracts by the U.S. Department of Defense were, by order of amount received; Lockheed, Boeing, General Dynamics (which comes in at No. 6 for being most generous to politicians), Raytheon, Northrop Grumman, and United Tech. Further, all of these defense contractors are among the top 10 biggest defense contractors in the world, when it comes to rankings by revenue.
Politics, money, and defense
In the world of defense contracting, it pays to be generous. Literally. For example, in the election cycles for 1998-2002, Lockheed was the top defense "giver." In 2001, it was also awarded the insanely expensive F-35 contract. In the 2010 election cycle, Boeing was the top defense giver. In 2011 it was awarded the KC-46 tanker contract. Coincidence? Maybe. However, perhaps it's less surprising that Lockheed and Boeing received two of the biggest contracts ever awarded by the Pentagon, in the same time frame where they were especially generous. Further, Lockheed has stayed in the top of defense "givers" for years. It's also the top defense company.
Who's getting the loot
Since 1990, defense contractors have contributed more than $200 million to politicians -- and 57% of that amount went to Republicans. However, before you jump on Republicans for taking defense handouts, consider that in the 2012 election cycle, Boeing's biggest beneficiary was none other than President Obama. More importantly, that's just how things are done in politics -- that's not to say it's right. However, for investors, this is information we can use. Right now, Northrop is the No. 1 defense contributor. I imagine there are also some lucrative contracts up for grabs, and it's greasing the wheels. The same could be said for Lockheed and Raytheon.
In addition, all of the companies I've mentioned have significant political clout, and frankly, politicians have a vested interest in having them succeed -- it's a "I'll scratch your back if you scratch mine" kind of deal. Consequently, they make great long-term investments.
Fool contributor Katie Spence owns shares of Northrop Grumman. Follow her on Twitter: @TMFKSpence. The Motley Fool owns shares of Lockheed Martin, Northrop Grumman, 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.