Is Your Portfolio Bulletproof?

I am a Fool.

I know this not just because the name on our website tells me so -- but because of the audacity of what I intend to accomplish today. I intend to pick a portfolio of stocks, all drawn from a single industry, which will beat the market. And not just beat it, but crush it.

Why is this Foolish? Because everyone knows that you can't beat the market. (Despite the fact that The Motley Fool has been doing just that for seven years and counting.) Everyone knows, too, that your best chance of even tying the market lies in broad diversification -- the best example being buying an index fund.

Balderdash
Fortunately, we make a habit of disproving conventional wisdom here at the Fool. So today, I'm setting out to prove it can be done. Having recently surveyed the defense industry's best large-cap stocks (yes, and its best small-cap stocks, too), I hereby challenge Mr. Market to a duel. My best half-dozen defense ideas versus whatever the S&P 500 can throw at me.

My team
My team consists of a small army of small- and large-cap defense names, each having two things in common: First, each company occupies the sweet spot of one or more crucial niches within the defense industry. Second, each company's stock trades at a discount to its intrinsic value.

Some of 'em you've heard of; others, perhaps not, so after telling you who's going into the portfolio, I'll give you a quick rundown of each -- and why they make the cut:

Source: Yahoo! Finance. *Tracking begins on July 10, 2009.

Here's why I'm picking them:

General Dynamics
Whether you're U.S. Army, Air Force, Navy, or Marines, General D has got your six. On the ground, this company dominates the battlefield with its M-1 Abrams main battle tank. At sea, "Admiral Dynamics" is rebuilding the Navy from the keel up with its revolutionary Littoral Combat Ship. And although it sold the bulk of its piloted plane operations to Lockheed way back when, the General has recently begun playing Sky Marshal again as it attempts to construct the Air Force of the future -- unmanned aerial drones.

Raytheon
Did someone say drones? Raytheon's got your drones right here, buddy. Building on decades of expertise in the field of rocket science, Raytheon is developing new and more interesting ways to visit exotic locales, meet interesting people, and ... kill them. The company recently licensed the KillerBee UAV from Northrop Grumman, and plans to evolve it into an entire family of flying robots for the military. It's also got a great new toy in the Miniature Air-Launched Decoy -- essentially a drone capable of making people who look at it think it's a full-size aircraft. Cool.

Lockheed Martin
Next, let's bring Lockheed up on stage -- singing "anything you can do, I can do better." If General D and Raytheon have their hearts set on building tiny robot planes, Lockheed has its sights set higher. Much higher. Partnered with Boeing (NYSE:BA), it's the biggest name in international space exploration. Lockheed also manufactures the F-35 Lightning II, which surveys say will become the world's first trillion-dollar warplane -- and maybe more.

AeroVironment
But we were speaking of UAVs. AeroVironment may not be the biggest defense contractor in the world, or build the biggest flying robots -- but it's doing a mighty fine job of building, and selling, small UAVs. So far it's gone head-to-head with the big boys in four separate competitions for Pentagon business -- and won every one of 'em.

iRobot
Closer to ground level we find iRobot -- they of the humble Roomba. But this company does more than just vacuum floors. Like the Three Billy Goats Gruff, the tiny Roomba has a big brother, the Small Unmanned Ground Vehicle, and an even bigger brother, the PackBot. What everybody else is trying to do in the air, iRobot has already accomplished on the ground.

Force Protection
And speaking of the ground, did you know that in some armies, not all the fighting is done by robots? Honest. I kid you not. And when humans fill the role of providing boots on the ground, Force Protection is there with a whole range of armored vehicles to protect them from bad guys' bullets, and improvised explosive devices alike.

What next?
This week, all we've time for are a brief introductions to the companies making up my portfolio. Every week from here on out, though, I'll update you on how this model defense portfolio is performing -- and if not, why not -- and generally prattle on about defense industry goings-on.

Sound like fun? I think it will be. So check back here in one week's time, and we'll see how things are playing out.