The shares of this defense company were recently initiated with a ‘Positive’ rating at Susquehanna.
Raytheon Company (RTN)
From The Personal Capitalist
Raytheon Company (RTN) is a favorite among the 18 analysts following the stock with 6 rating it as a “Strong “Buy,” 4 as a “Buy,” and 5 as a “Hold.” Also, we hold PPA (our number one position) which gives us great diversification in this important sector. Raytheon remains a top pick given balance sheet optionality, leading margins, and thematic exposures (e.g. missile defense).
We see defense spending rising at a reasonably healthy rate, addressing concerns of a rollover in budgets. This should continue to support a narrative of healthy annual total returns with below average risk discounted valuations. In other words, the defense end-market still offers growth at a time of uncertainty. Keep in mind that defense stocks underperformed the broader market over the past year as the White House sent conflicting signals over defense spending plans.
We have 10 full sized aircraft carriers to project our power abroad. However, we need to keep in mind Chinese and Russian competition. The world is an unstable place and we need to project a powerful defense image. In a recent Tulsa World article (February 3rd), Senator Jim Inhofe, Chairman of the Senate Armed Services Committee, suggests that the facts are clear; we are actually falling behind Russia and China and that gap will only grow wider and faster without a sustained and continued commitment to sufficient funding. He agrees with the bipartisan National Defense Commission that calls for a 3-5% increase per year in defense spending to address shortfalls.
He states that we are in the most threatened position of his lifetime (a very strong statement), and that we must prioritize our defense capabilities to deter the threats we face from China and Russia. He feels that only way we can do that is by investing in the maintenance and modernization efforts that have been neglected for too long. Jim Inhofe is a major voice to be heard because of his present position and long standing experience in following this sector. One of our newsletter contributors knows Inhofe well and respects his informed opinion. These are powerful statements, but very indicative of the potential of investing in this sector. The Personal Capitalist rates defense as its number one sector.
Sean Christian, The Personal Capitalist, 9524 East 81st Street, Suite B #1715, Tulsa, OK 74133, February 18, 2019