It's been more than 300 years since warriors entering the battlefield habitually suited up in plate armor. But like hunting with crossbows, armour couture is making a comeback.
In the last couple of weeks, the U.S. Armed Forces allocated no fewer than three contracts to three separate manufacturers, each aimed at putting more protection between our servicemen and hostile fire. Last week, for example, ceramics specialist Ceradyne (NASDAQ:CRDN) booked $13.3 million worth of orders from the U.S. Marine Corps and U.S. Special Operations Command in Florida.
Yesterday, it was General Dynamics (NYSE:GD) landing a $45 million U.S. Army contract, this time for the production and installation of 505 "Tank Urban Survivability Kits," which include reactive armor tiles to protect tanks from the shaped-charge IEDs that have been popping up with increasing frequency in Iraq. Also announced Tuesday was a $73.6 million contract awarded to Armor Holdings (NYSE:AH) to purchase armor that increases the survivability of Humvees.
That's a lot of interest in armor. From an investor's perspective, the conclusion is obvious: Buying shares of these three armor manufacturers looks like a good bet.
Obvious, maybe, but obvious bets rarely result in surprising returns. Savvy investors might want to look at what's happening here in a slightly more expansive manner, by focusing on the common element of each of these contracts -- a desire to keep soldiers safe -- and what other companies might benefit from it.
Along this line of thinking, I see at least two other (publicly traded) companies well positioned to benefit from the military's growing desire to minimize casualties. In contrast to Ceradyne, General Dynamics, and Armor Holdings, each of which aims to protect soldiers from harm, firms like Northrop Grumman (NYSE:NOC) and Motley Fool Rule Breakers pick iRobot (NASDAQ:IRBT) are working to remove more soldiers from harm's way entirely -- by letting machines do more of the work.
As one of the firms partnering with lead contractor Lockheed Martin (NYSE:LMT) to build the new F-35 Lightning II strike fighter, Northrop is surely aware of that warplane's nickname: "the last manned combat aircraft." I think Northrop sees the writing on the wall, which is why it's investing so heavily in unmanned aerial vehicles (UAVs) like the Fire Scout and Global Hawk. Meanwhile, iRobot has put its Packbot into service disarming roadside bombs. In both instances, the idea is to build replaceable machines to do work that currently requires soldiers to put their lives on the line.
Judging from the military's spending on body and vehicle armor over the past week, I'm thinking that's an idea with a future.
With a P/E of 93, can iRobot really be a good investment? We debate, you decide, in: Dueling Fools: iRobot.
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Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.
