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.
A very big deal
On Monday, the Pentagon announced new contract awards totaling at least $1.38 billion in combined value — and potentially much more than that. The largest of these awards, won by a single company, was a $372.9 million U.S. Army contract ordering privately-owned AM General to supply several foreign customers (Afghanistan, Iraq, Kenya, Lebanon, Tunisia, and Ukraine) with a total of 2,082 High Mobility Multipurpose Wheeled Vehicles (HMMWVs) and spare parts for same.
The largest contract awarded — period — however, was a multi-party award issued by the U.S. Navy. Through it, seven separate defense contractors were hired to perform “specification and design, fabrication, installation, test and evaluation, fielding, maintenance, training, and configuration and program management” work on new unmanned maritime systems, both surface and subsurface, engaged in waterborne and underwater mine countermeasures. Put simply, these firms have been hired to design new robotic submarines and surface warships for the Navy.
Participants and the monies they were awarded under this contract include:
– Harris Corporation’s (NYSE:HRS) Exelis subsidiary — $135.6 million for a base three-year contract, rising in value to as much as $228.5 million if two one-year option periods are exercised
– Science Applications International Corp (NYSE:SAIC) — from $128.9 million to $217.5 million
– Lockheed Martin (NYSE:LMT) — from $126.4 million to $214.2 million
– ManTech (NASDAQ:MANT) — $104.4 million to $174.7 million
– Privately-owned Camber Corp. — $111 million to $185.9 million
– Privately-owned MAR Range Services — $108.9 million to $183.3 million
– Privately-owned Applied Research Associates — from $130.8 million to $221.6 million
Absent option exercises, these contracts are worth $846 million combined. With options — as much as $1.43 billion.
In other news, Oceaneering International (NYSE:OII) was awarded an $18.6 million Navy contract to enlarge dry dock shelters carried on the back of Virginia-class nuclear submarines (used to transport smaller underwater vehicles and robotic submarines) and to install remote-controlled outer doors and power systems for same.
Insider trading notes
Insider trading trends among these companies are mixed. Oceaneering International, for example, has reported no insider buying activity whatsoever in the past three months — but two insider sales.
At Harris and Lockheed Martin, there have been some insider purchases, but even more insider sales.
At SAIC, more insider purchases than sales have taken place during the period. However, the sales have been large enough to dwarf insider purchases to the tune of 18,948 more shares sold than bought.
ManTech, in contrast, has seen significant insider purchases over the past three months — seven insider purchases versus just two insider sales, and with shares bought outweighing shares sold by 14,190 shares.
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