Weather dominated the headlines -- and highways -- last week, as millions of Americans up and down the East Coast found themselves snowed in for the duration.

This can't be good news for retailers like American Eagle (NYSE:AEO) or Aeropostale. Be alert for bad news when the next round of comparable sales data comes out in early March, or even sooner: Wal-Mart (NYSE:WMT) may comment on how bad things got when it reports earnings Thursday and gives some hints on forward guidance. Economists have already predicted that snowstorms could cause 90,000-150,000 jobs to be lost in February. If that sounds like hogwash to you, jobs numbers will make their debut on March 5th.

In contrast, Toyota (NYSE:TM) can't point the finger at Mother Nature for its troubles. The company's ceaseless stream of vehicle recalls is a mess of its own making. Meanwhile, defense industry investors had their own problems to worry about:


Starting Price*

Recent Price

Total Return

General Dynamics (NYSE:GD)








Lockheed Martin












Force Protection








S&P Spyder








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

Once again, we're lagging the market badly. But the stock prices notwithstanding, it's not all bad news in the defense sector. For example ...

Boeing's back …
Last week, Boeing's (NYSE:BA) commercial business finally began picking up the slack that its defense unit's had to carry in recent years. The company's new 747-8 airliner made a successful maiden voyage, and can finally join the 787 in the skies for months of pre-FCC certification testing.

… and Oshkosh too
Oshkosh (NYSE:OSK) scored a win of its own when a Pentagon peer review of its "Family of Medium Tactical Vehicles" (FMTV) procurement -- awarded to Oshkosh in August, but quickly challenged by Navistar and BAE Systems -- found everything kosher with the contract. With the stop work order now lifted, Oshkosh has a clear road ahead of it, and can begin building the 23,000 trucks and trailers the Army needs. Value: $3 billion in expected revenues over the next four years.

And Iran? We're keeping an eye on you!
Now, $3 billion is hardly small potatoes for Oshkosh, and Boeing's playing for even higher stakes with the 747-8. Orders on the book already amount to around $31.5 billion in revenues for the aerospace giant. But to my Foolish eye, several other stories appearing in recent days may add up to even bigger profit potential for defense investors.

Item No. 1: Two weeks ago, Iran announced the successful launch of a space-bound rocket carrying a small menagerie of kindergarten class pets into space.

Item No. 2: One week later, Iranian President Mahmoud Ahmadinejad proclaimed his country a "nuclear state." Announcing the successful enrichment of uranium to 20%, Iran argues it now has the capacity to produce enough enriched uranium to manufacture a nuclear weapon if it so desires. (Which, of course, he says it does not.)

Item No. 3: Coincidentally (?), the Pentagon awarded Lockheed Martin (NYSE:LMT) a $160 million contract last week to support the Aegis Ballistic Missile Defense Weapon System -- a ship-borne ballistic missile deterrent.

Item last: Last but not least (and at least as "coincidental" as the Lockheed contract), Boeing just announced the first-ever successful shootdown of a ballistic missile in-flight by its experimental Airborne Laser. Operating out of Edwards Air Force Base, a modified Boeing 747-400F equipped with the device successfully engaged and destroyed a missile in its boost phase off the coast of California.

What's it all mean to investors?
Viewed in isolation, these four items may look like no more than a couple over-the-top press releases out of the Islamic Republic, paired with a relatively small revenue gain for Lockheed, and a puff piece for Boeing -- on a program that the Obama administration has put the kibosh on, no less. But when you string 'em together like this, I submit to you that they add up to something a bit more significant: A strong case for the need to continue funding missile defense, and evidence that the Pentagon recognizes this need.

My advice: Take a good hard look at the several companies positioned to benefit from a surge in missile defense spending -- Boeing and Lockheed, most obviously, but also Raytheon, Northrop Grumman, Orbital Sciences, and others. Across the defense industry, valuations look awfully depressed relative to how these stocks have been priced in the past. I doubt the prospects for significant increases in missile defense spending have been "priced-in" yet.

But the more we read about stories like the four outlined above, the more likely these stocks are to reflect their true value once again. Never surrender.

Who's the hands-down best bargain in the defense industry? Motley Fool Inside Value knows the answer. Take a free, 30-day trial and find out.

Fool contributor Rich Smith is does not currently own any stocks named above, but Wal-Mart Stores and General Dynamics are Motley Fool Inside Value recommendations and Orbital Sciences, Aerovironment, and iRobot are Motley Fool Rule Breakers picks. The Motley Fool has a disclosure policy.