Good news for Christmas stock shoppers: the Lockheed Martin (NYSE:LMT) stock chart is having a banner year -- up more than 29% at last count, and beating the S&P by a factor of nearly two and half. The question investors must ask now, though, is whether Lockheed's performance is a mere blip -- or something more sustainable.

LMT stock chart data by YCharts.

After all, things haven't always looked this good for the company. Lockheed Martin stock spent much of the past six years of the Obama Presidency "underwater" relative to the S&P 500 (red line). Viewed within this short, specific time frame, Lockheed Martin only recently began to emerge from the stock market's shadow.

LMT stock chart data by YCharts.

But truth be told, if any time period on the long-term Lockheed Martin stock chart constitutes a "blip," it was this period of defense spending slowdowns, characterized ultimately by the Sequester. And you can see this most clearly by taking a step back, and considering Lockheed Martin's performance during the past 10 years:

LMT stock chart data by YCharts.

Pretty clearly, Lockheed Martin stock has been a strong performer for far longer than just the year 2014 -- and it's performed well in spite of a few weak years under the Obama Administration. So how has Lockheed Martin done this, and can it keep the strong performance up?

Right place, right time, right stock?
Almost certainly, the first Lockheed Martin stock chart up above owes much of its strength this year to its leading role in the fight against ISIS. As the company behind the F-16 fighter jet and the F-22 Raptor -- two key elements in the air war against the Islamic terror group -- and as a major manufacturer of the bombs and missiles being rained down upon ISIS combat elements, Lockheed Martin directly benefits from U.S. (and allied) military spending in Syria and Iraq.

And yet, it's that chart in the middle that gives investors pause -- the one showing a four-year stretch in which LockMart stock lagged the performance of the S&P 500 badly. What was up with that?

Lowered expectations, depressed stock price
I don't think it was due much to the Obama Administration at all -- which, as I've argued in the past, has actually been pretty friendly to the military-industrial complex. The fact that Lockheed Martin spent some time "in the wilderness" was due more to investor worry that the Obama Administration might turn dovish than to any actual moves in that direction.

Sure, defense spending has slowed down a bit -- with the U.S. exit from Iraq, and the partial drawdown of forces in Afghanistan, it could hardly have been otherwise. But real, sizable reductions in defense spending remain an overblown fear in my opinion.

What will the Lockheed Martin stock chart look like in the future?
Now that these fears have proved false, we're seeing the Lockheed Martin stock chart return to its historical pattern of strength. Will it continue to trend upwards, and outperform the S&P 500?

I don't see why not. After all, analysts who follow Lockheed predict the company will continue growing profits at 9.7% annually during the next five years. The stock pays a 3.2% annual dividend yield. If you add those two numbers, Lockheed's expected total return for investors should approximate 12.9% annually. That's a good 0.7 percentage points ahead of the total return from profits growth and dividends of the average S&P 500 stock.

If stock price performance tracks financial returns from the company, as it should, this bodes well for Lockheed Martin's stock chart going forward. And Lockheed boasts other advantages over other run-of-the-mill S&P 500 stocks, advantages such as:

  • Lockheed Martin owns the world's top-selling fighter jet, the F-16 Falcon.
  • Lockheed also owns the only fifth-generation stealth fighter jet in the world, currently in active use -- the F-35 Lightning II.
  • According to no less an authority than Admiral Mike Mullen, former chairman of the Joint Chiefs of Staff, this very same F-35 will probably be the last manned fighter jet the U.S. ever produces -- giving Lockheed Martin what amounts to a monopoly over fighter jet production going forward.
  • Look a bit higher up, and Lockheed is one half of the world's biggest duopoly in space exploration, United Launch Alliance.
  • Back down on Earth, the company may be about to solve the global energy crisis, once and for all.

Put it all together... and yes. All things considered, I'd say I'm pretty optimistic about Lockheed Martin's chances going forward.

It's hard to be pessimistic about a company that thinks it's solved the mystery of nuclear fusion. Still shot from Lockheed Martin video.