If you’re not paying attention to the conflict in Ukraine, the takeaway is it is escalating rapidly. Among the latest developments is Germany’s approval of Poland’s request to send Leopard tanks through its country to Ukraine.
Another striking development has been the call by Boris Johnson and others to permit Ukraine’s entry into NATO, which would necessarily classify attacks on Ukraine as assaults on every NATO country, and provoke a response.
Many war analysts have concluded the Ukraine conflict is much more serious than most in the West realize. It is a concerted effort by the west to weaken Russia, prior to an all-out assault to defeat Russia militarily. The buildup of tanks and F16s into Ukraine is evidence of this fact in their view.
Obviously an attack on Russia risks a contagion where China may come to the aid of Russia, leading in turn to an all out global war: World War III.
Should the military conflict escalate, and we all hope it doesn’t, it is prudent to buttress your portfolio from the most likely inevitable stock market decline that follows. Two stocks that could cushion the blow are Lockheed Martin and Raytheon.
Raytheon Technologies produces a wide range of weapons systems that are in high demand, especially in Ukraine, including:
- Stinger and Javelin missiles
- High-speed anti-radiation missiles
- National Surface-to-Air Missile Systems
- Patriot missile-defense systems.
It’s no surprise then that revenue forecasts are especially strong over the coming years for Raytheon.
When we dug into the figures, we were surprised by just how much the company is expected to grow top line sales:
- 2023: $72.4 Billion
- 2024: $78.5 Billion
- 2025: $86.3 Billion
- 2026: $91.5 Billion
Those figures would translate to EBITDA growing from $12 Billion in 2022 to $20 Billion by 2026.
Earnings per share would pop from $4.80 in 2022 to $7.10 in 2026. At the current P/E multiple the share price is trading at that would translate to the share price more than doubling from here to over $200 per share.
During our research of Lockheed Martin, we uncovered a piece of evidence that suggests the future for the firm – if not the world at large – is rosy.
Director John Donovan, an insider at the company, has been accumulating a lot of shares. In July last year, in one purchase alone, he snapped up a quarter of a million dollars worth of shares. Congressmen, Kevin Hern and Scott Franklin, have also built up positions in Lockheed.
First of all, Lockheed Martin is the world’s largest defense contractor so it should necessarily benefit from government contracts that increase should the Ukraine conflict escalate to become World War III.
Further, the company plans to increase its stock buyback program and boost free cash flows.
And finally, the company has a large backlog, suggesting a stable revenue stream, as well as a predictable dividend.