Welcome back from the Labor Day weekend. So, we hit 9.7% unemployment, huh? What a way to celebrate ...

The economy is still decelerating, but here in the realm of defense investing, it's been a busy weekend for our Super-Six defense stocks, which are coming off their third straight week of gaining ground on the S&P 500. Let's take a quick look at their performance to-date, then dive right into the week's news:

Company

Starting Price*

Recent Price

Total Return

General Dynamics

$51.54

$58.80

14.1%

Raytheon (NYSE:RTN)

$42.27

$45.88

8.5%

Lockheed Martin (NYSE:LMT)

$77.69**

$74.88

(3.6%)

AeroVironment

$29.96

$28.99

(3.2%)

iRobot (NASDAQ:IRBT)

$11.49

$11.41

(0.7%)

Force Protection

$4.57

$5.21

14%

AVERAGE RETURN

 

 

4.9%

S&P Spyder

$88.17

$100.65

14.2%

DIFFERENCE

 

 

(9.3)

Source: Yahoo! Finance.
*Tracking began on July 10, 2009. Portfolio is equal-weighted, with "recent price" being set at market close on the Thursday preceding publication, and adjusted for stock splits and dividends.
**Adjusted for dividends.

In through the out door
Starting at the top, Defense Portfolio land warrior General Dynamics announced last week that it has finalized its purchase of Axsys Technologies. Scratch $643 million from GD's balance sheet. Add one heaping helping of infrared camera technology to its product portfolio.

Meanwhile, in other comings-and-goings news, aerospace stalwart Honeywell (NYSE:HON) saw two execs depart the personnel rolls at Honeywell Aerospace. Former division chief Rob Gillette is jumping ship to grab the rudder at First Solar (NYSE:FSLR); division CFO Bob Hau will be doing his number crunching for Lennox International from now on.

Contracts, more contracts, and yes, even more contracts
Who was it that said an Obama White House would be bad for defense spending? I understand the sentiment, folks, but so far, I'm not seeing much of a slowdown. Last week saw:

  • Goodrich raked in $400 million in contracts to retrofit Boeing C130s.
  • Lockheed landed a $421 million support contract with the Air and Space Operations Center.
  • And Oshkosh (NYSE:OSK), already a big winner in the Pentagon Lottery, booked its latest victory when the Air Force ordered $20 million worth of vehicles for firefighting and snow removal (Sexy, I know -- but hey, $20 mil is $20 mil).
  • Last but not least, Defense Portfolio member iRobot, was asked to deliver its latest installment in the Army's 3,000-robot xBot program. The Army's TACOM Contracting Center is sending nearly 500 more PackBots to the front lines in Iraq and Afghanistan, and shelling out $35.3 million to iRobot.

Oh, and last and least, FLIR Systems made a $5 million sale to the Colombian military. Which is small a contract that I wouldn't ordinarily mention it, except that it gives me a good segue into ...

No boo-yah for Boeing in Brazil
FLIR isn't the only company with designs on making sales south of the border. As I mentioned a few weeks back, Boeing (NYSE:BA) had high hopes there as well. Specifically, Boeing's Super Hornet fighter jet was dogfighting multiple rivals for a multibillion-dollar Brazilian defense contract.

So much for that idea. The Associated Press is now reporting that Boeing got out outgunned. All Boeing's got going for it, you see, is great fighter jets. France's Dassault packs a whole lot more firepower, and seems close to locking down the contract thanks to:

  • French willingness to transfer fighter jet technology to its Brazilian customer, and allow Brazil to use that technology to manufacture its own fighters ... and sell them abroad.
  • A counter-trade, whereby France buys a dozen Embraer KC-390 Brazilian transport aircraft in exchange for Brazil buying its fighters.
  • And the coup de grace: France will be supporting Rio de Janeiro's bid to host the 2016 Olympic Summer Games, and asked for Brazil to back France's run at the 2018 Winter Games.

C'est tres interessant, non?

Boeing battles back
I doubt this was the note that Boeing Integrated Defense Systems boss Jim Albaugh wanted to exit on, as he takes the reins at Commercial Aircraft in an effort to salvage Boeing's troubled 787 program. So let's hope that Boeing's other big news of the week gets more play in the press.

I'm speaking, of course, of the blockbuster news out of Geneva: The WTO has tentatively ruled European financial support of Airbus illegal. By lowering the cost of Airbus building airplanes, Europe's governments have unfairly damaged Boeing's business.

Granted, this is primarily a moral victory. Maybe Airbus will have to repay the funds it received from its government sponsors, maybe not. For that matter, maybe the ruling will stand and become final ... and maybe not. (America's earth-shattering financial bailout programs for banks, automakers, and Lord-only knows-who-else-has-their-hand-out certainly hasn't helped our case.)

Foolish takeaway
Still, Washington is all a-rumble with threats to "incorporate" the WTO ruling into the Pentagon's KC-X Tanker competition. Boeing backers want an examination how Airbus's receipt of government support affects the "validity" of the joint EADS/Northrop Grumman bid to build a new refueling tanker for the Air Force. So while it's not entirely clear how this trade kerfuffle will resolve itself, for now, score one for Boeing. It looks back on top.

I wish I could say the same for the Defense Portfolio -- but we took an awful drubbing in July and August. It's going to take a while to win back the ground lost. Still, three weeks of solid gains over the market suggest to me that our initial investment theses remain sound. There's real value in these companies, no matter what the pundits say.

With a little patience, I'm convinced we'll lick the market yet.