For many investors, the U.S. government seems a black box. Taxes go in, spending comes out — but with the exception of the occasional headline-grabbing megacontract, where the spending goes, and how much goes to whom, remains very much a mystery.
But if you look very carefully (and know where to look), you can sometimes get a glimpse at where the money is going. Believe it or not, one of the easiest places to spy on government spending is… the U.S. Pentagon.
This could go nuclear
Another slow day at the Pentagon saw only seven contracts awarded Wednesday. But with a combined $429 million in value handed out, there were still a few notable winners worth discussing.
Raytheon (NYSE:RTN) for example, won a pair of Navy contracts, one worth $52 million, and the other just $7.5 million. The larger award will pay for Raytheon to complete analyses of the Joint Precision Approach and Landing Systems (JPALS), an all-weather landing system that makes use of GPS signals to guide an aircraft to its landing point. The smaller award seems somewhat related, and will have Raytheon refurbish, maintain and then upgrade two Naval Air Systems Command (NAVAIR) Air Traffic, Navigation, Integration, and Coordination Systems (ATNAVICSs) for the Navy.
Separately, Northrop Grumman (NYSE:NOC) won $14.6 million in additional funding to provide logistics support to U.S. Air Force KC-10 refueling tankers.
The day’s largest award, however (actually two awards) was a fixed-price, multiple-award contract that will be split between privately-held Q.E.D. Systems and International Marine and Industrial Applicators LLC — a sub-sub-subsidiary of defense giant General Dynamics (NYSE:GD). Both firms are being hired to perform “preservation” work (e.g. sand-blasting and repainting, general shipboard cleaning, and other work) on U.S. Navy Los Angeles-, Virginia- and Ohio-class nuclear submarines while they are in port. Q.E.D. has been awarded $148.7 million for this work, and Industrial Marine $141.4 million.
Insider trading notes
As previously mentioned, insider sales transactions have been outrunning insider purchases 3-to-1 over the past three months, with the actual number of shares sold outnumbering shares purchased by more than 6-to-1. Contrariwise, at Northrop Grumman, insider purchase transactions have outnumbered insider sales 11-to-5 over the past three months — but even so, the actual volume of shares purchased is outweighed by the number of shares sold by 38,042 shares.
The biggest disconnect between transaction volume, and shares-traded volume, however, is found at General Dynamics. There, the past three months have seen 21 insider buys, only three insider sales — but a whopping 171,729 more shares sold than bought.
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