Does the Sequester Threaten These Defense Stocks? Lockheed Martin Corporation (LMT), United Technologies Corporation (UTX)

Page 2 of 2

Another trend to watch in defense is cyber security. We’ve seen Raytheon Company (NYSE:RTN), General Dynamics Corporation (NYSE:GD), and Northrop Grumman Corporation (NYSE:NOC) all make acquisitions related to cyber security in 2012 with China, we know, getting increasingly involved with that. That’s possibly a major growth area, going forward.

The defense industry, looking at these stocks — Lockheed Martin Corporation (NYSE:LMT), Raytheon trading at about 10X earnings, Northrop Grumman trading at about 8X earnings — there’s a reason they’re this cheap. We have a lot of uncertainty baked in here.

I think Lockheed Martin Corporation (NYSE:LMT) could be a solid play if you’re looking for maybe a little bit of defensive stock, a 5.2% dividend, so you could collect that. I wouldn’t expect a ton of growth, going forward, but in this space I like United Technologies Corporation (NYSE:UTX). It’s a stock I own, it’s better diversified. They have a bunch of different units; Otis Elevators, Carrier, that can help them better diversify, also other commercial aviation interests.

I would look for a more diversified play in this space, but again Lockheed Martin could be a solid value play for a dividend-seeking investor.

Andrew: Definitely it’s interesting connecting the dots between these macro storylines we see, and boiling it down to specifics.

Brendan: It’s just a lot of uncertainty, which freaks out investors.

The article Does the Sequester Threaten These Defense Stocks? originally appeared on Fool.com and is written by Brendan Byrnes.

Brendan Byrnes owns shares of United Technologies. The Motley Fool owns shares of General Dynamics, Lockheed Martin, Northrop Grumman, and Raytheon Company.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2