Two Defense Stocks to Defend Your Portfolio
I never want to write about war or how to profit from it. The fact is when wars do occur, thousands if not millions of lives are lost, many of them innocent. It is an awful thing for the world to go through and as we can see with the war in Ukraine, it has far-reaching economic impacts.
With that being said, the rising tensions in Taiwan right now are signalling that we could be on the verge of an unfortunate conflict. The Chinese government is running military drills in Taiwanese waters, similar to what Russia was doing to Ukraine before it ultimately invaded. When the United States is involved in a potential war, it should surprise nobody that defence companies stand to gain. Let’s take a look at 2 defence stocks that you can watch to defend your portfolio.
Lockheed Martin (NYSE: LMT)
This first company should come as no surprise. Lockheed Martin is the world’s largest defence company and is the largest contractor to the United States government. This company designs and produces some of the world’s finest military weapons including the Black Hawk helicopter, the F-35 fighter jet, and the U-2 Dragon Lady. The F-35 is the world’s most expensive airplane, and the United States government and some of its allies have more than 3,000 orders to be made by 2035. In late February, Lockheed Martin was also the successful bidder for a $1.2 billion contract for America’s first sea-based hypersonic strike system. The stock has been relatively flat in 2023, but things could be picking up shortly. With a 2.45% dividend yield and a solid track record of performance, Lockheed Martin is one defence stock to own during times of both war and peace.
Northrop Grumman (NYSE: NOC)
Northrop Grumman often gets overlooked in the defence space. It isn’t a household name like Lockheed Martin or Boeing (NYSE: BA), but its portfolio of vehicles and weapons is critical to the country’s defence. Northrop manufactures vehicles but also specializes in providing technologies and systems to planes such as Lockheed’s F-35. The company is a leader in stealth technologies and B-21 Stealth Raider is surely to be a key to American defence in the future. Perhaps more critically, Northrop also is a leader in the nuclear weaponry field, something that has been in the headlines after threats from both Russia and North Korea. It has a strong portfolio of nuclear missiles, stealth aircraft, and even submarines that can work to mitigate an attack or retaliate if America is ever threatened. Given Taiwan’s unique geographical surroundings, it is possible that both submarines and aircraft will be needed should a conflict ever arise. Northrop trades at a much lower price-to-earnings multiple than Lockheed and also pays out a 1.47% dividend yield to shareholders.
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