Last week was a happy one for stock investors. Even as fears of dollar devaluation grew, Warren Buffett proclaimed the recession's end (sort of), and Citigroup (NYSE:C) declared its need of taxpayer support at an end. Hundreds of companies closed at new 52-week highs.
But the best news of all was that ... our Defense Portfolio got back on track. After stumbling briefly last week, our portfolio of six bulletproof stocks returned to growth mode, gaining back 110 basis points versus the broader S&P 500:
|
Company |
Starting Price* |
Recent Price |
Total Return |
|---|---|---|---|
|
General Dynamics (NYSE:GD) |
$51.54 |
$64.43 |
25% |
|
Raytheon (NYSE:RTN) |
$42.27 |
$47.72 |
12.9% |
|
Lockheed Martin (NYSE:LMT) |
$77.69** |
$79.56 |
2.4% |
|
AeroVironment |
$29.96 |
$28.50 |
(4.9%) |
|
iRobot |
$11.49 |
$12.58 |
9.5% |
|
Force Protection |
$4.57 |
$5.71 |
24.9% |
|
AVERAGE RETURN |
|
|
11.6% |
|
S&P Spyder |
$88.17 |
$107.16 |
21.5% |
|
DIFFERENCE |
|
|
(9.9) |
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.
All but one of our stocks are now showing a profit from their initial recommendation price, but do they deserve to? Depends on whom you ask ...
AeroViroment mends a wing ... and other stories
UAV-maker AeroVironment had its wings clipped by an historic earnings miss last week. But after the expected sell-off had run its course, Wall Street analyst Dougherty & Co. took a close look and decided the pessimism was overdone. It swooped down, upgraded the shares, and cut our loss in half, making a tidy profit for previous AeroVironment investors in the process. So who says greed is bad?
And it wasn't just AV enjoying the love. Across the length and breadth of the defense sector, investors received good news of various stripes.
Oshkosh (NYSE:OSK) booked another $189 million in winnings from its June MRAP-Lite contract. The new order brings Oshkosh's M-ATV pipeline to a total of 4,296, and promises $2.3 billion in revenues will flow to the Wisconsin truck maker.
Newly flush-with-cash Textron (NYSE:TXT) announced a tender to retire some $650 million worth of debt. And over at Boeing (NYSE:BA), the aerospace giant is making headway on plans to extract billions from Congress to purchase its C-17 transport aircraft, and counting the days till it gets a third bite at the apple on the KC-X Contract (Stay tuned. We'll have more information on this deal as it is released.)
Tanks versus airplanes: Who wins?
But the biggest news of the week comes courtesy of two of the Defense Portfolio's biggest companies: General Dynamics and Lockheed Martin. Reversing a standing policy of trying to keep both companies involved in its Littoral Combat Ship project -- alternating production of each successive LCS -- the U.S. Navy announced last week that it will hold a winner-take-all competition for the next 10 vessels. Reportedly, cost concerns motivated the decision, as both General D and Lockheed went overbudget on the project initially. But the Pentagon hopes that if it gives each firm a chance to grab the whole enchilada, they might be willing to come in with more acceptable, affordable costs.
So here's the plan. The Navy will ask both companies to bid on a tranche of 10 LCSs, two to be built in fiscal 2010, with the balance coming on line in pairs over the next four years. In 2015, the Pentagon will assess the damage and decide whether to repeat the process for future deliveries (the Navy wants a 55-LCS fleet when all's said and done.) Who wins from this deal? I've got my suspicions.
General Dynamics had no comment on the report. In contrast, Lockheed praised the decision as making it "possible to further enhance the affordability of this important new class of ship" and declared "we fully support the initiative."
Lockheed floats the Navy's boat
As well it should. Although both companies stumbled out of the harbor in their efforts to build prototype LCSs, the Navy soon changed its tune when it began testing Lockheed's submission. Observing that the USS Freedom was delivered with a low number of "material deficiencies" found in the first ship, the Navy praised Lockheed for delivering a product that was "capable, well-built and inspection-ready."
Foolish takeaway
So to anyone who says Lockheed's a one-trick pony, that its future depends on the F-35 fighter jet and that alone, I say: Think again. This stock's got real potential.
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