5 Best Defense Stocks to Buy for 2021

Boeing’s Defense division manufactures defense, aerospace and military equipment. In April, the company’s leadership said that Boeing’s defense and space unit will outperform its commercial airplane business, which is suffering amid the grounding of 737 MAX following two crashes.

“Our government services, defense and space programs will provide critical stability for us moving forward. In fact, our work in these areas accounted for 45 percent of our overall revenue in 2019. That will obviously increase in the year ahead,” Boeing’s CEO Dave Calhoun said in April during the company’s first-quarter earnings call. Boeing’s defense division mainly deals in the development of manned and unmanned military aircraft and weapons, strike systems, surveillance and fighter jets.

Of the 816 hedge funds in our database, 43 had stakes in Boeing as of the end of the third quarter. The total value of these stakes is $1.70 billion. Here is what Miller Value Partners said about the stock when it was trading at $203:

“We’ve known Boeing for a long time. It’s always been a high quality company that’s traded for a premium valuation owing to its position as a global duopoly. We’d looked at it recently after weakness due to its highly publicized Max 737 issues, but it never got cheap enough for us to pull the trigger. After the pandemic, the stock went into freefall as its customer bases’ business dried up and people worried about its liquidity. The stock fell from $338 on February 19th when the S&P hit its high to a low of $89. We bought the stock after the new CEO Dave Calhoun said publicly that it would not take government capital if it required equity dilution because it had many other options. Our average price is just above $120 where it was trading for less than 7x what it earned in 2018. It will likely take a while to normalize to those earnings levels, but this business will survive and ultimately we will own a leader in a global duopoly. Even on depressed forecasts, the company currently has about a 10-15% free cash flow yield. If and when the economy normalizes, we think Boeing could be worth more than double its current price.”