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.
“Big Defense” rakes in the big defense contracts
The Department of Defense ramped up the spending on Wednesday, announcing 14 separate contracts worth roughly $924 million in total. As you might expect, some of the biggest defense companies in the country collected the bulk of the loot. The top three contracts of the day went to:
United Technologies (NYSE:UTX), which received a $63.7 million “option” exercise to remanufacture FI00-PW-I 00/200/220/220E/229 engine modules — the turbofans that power Boeing F-15 Eagle and Lockheed Martin F-16 Falcon fighter jets.
Speaking of which, the second biggest contract award of the day went to Lockheed Martin (NYSE:LMT) itself, the nation’s biggest pure-play defense contractor. For $226.9 million, Lockheed will supply 474 “unitary rockets and pods,” 1,950 “reduced range practice rockets and pods,” and 450 “alternate warhead rockets and pods.” Curiously, the Pentagon was silent upon precisely what kind of rockets Lockheed Martin will be supplying — and to whom. The only clue given was that the contract was classified as for “foreign military sales,” and therefore not to any of the U.S. military branches.
And finally, the day’s absolute biggest award by dollar value went to Boeing (NYSE:BA). Boeing won a $466.5 million indefinite delivery, indefinite quantity (IDIQ) award to repair guidance systems on U.S. Air Force Minuteman III intercontinental ballistic missiles. This contract will run through June 2, 2021.
Insider trading notes
Over the past three months, insider trading activity at all three companies has been decidedly negative. No open market stock purchases have been reported at either United Technologies or Boeing in the last three months, while both firms suffered at least a dozen sales.
Only one open market buy (and for only 2,000 shares) was reported at Lockheed Martin. Adding to the pessimistic tone of this report, Lockheed experienced four insider sales during this period, totaling 77,693 shares sold.
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