Defense and Aerospace: High-Flying Companies
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you can pardon the horrific pun I included in this article's title, you're certain to find a good idea in here. I sometimes wish I were already wealthy enough to buy large chunks of everything I research. I really like researching investments, particularly when they have the chance to really take off...
... okay, no more of those puns. Cool your jets. Okay, I was lying. Anything that has to do with potentially going into space is going to make me pun like a maniac. Without further ado, let's talk about why these are some sweet companies.
Seriously, These are Great Companies
Everybody loves Boeing (NYSE: BA) because it's one of the most inventive companies in the world. When they release a new model of airplane, everybody knows it and a lot of companies already want a few of them. On top of that, Boeing pays a respectable 2.5% dividend and trades at a reasonable 12.1 P/E ratio. It might make a good centerpiece to a portfolio to counterbalance smaller, potentially more volatile companies.
At precisely the opposite end of the scale is Moog (NYSE: MOG-A), a company barely tipping the scales at a $1.69B market cap. Not paying a dividend means Moog can focus its cash flow on growth, and its 6.1% profit margin make this growth a serious possibility. Since Moog is only trading at 1.3 times its book value, the market hasn't been paying it much attention. A little further research might be worth your while.
General Dynamics (NYSE: GD) is a more middle of the road company. Valued in the $23B range, I'm most interested in this highly diversified defense contractor because despite its reasonable 7.50% profit margin, it still pays an industry-leading 3.1% dividend. I like the middle of the road because while General Dynamics' size makes it reasonably stable, it still has plenty of room to grow. This is particularly true because the company is only trading at a 9.56 earnings multiple.
Seeing the Big Picture
FLIR Systems (NASDAQ: FLIR) may be fairly small at a $2.96B market cap, but this advanced imaging company has strong earnings. Running on a 15% profit margin and trading at 1.9 times book value, I think this powerhouse company may have some gains to make. Even if FLIR hangs around the same price for a while, the 1.4% dividend is fine by me.
A Company That Could Guide Your Returns to the Stratosphere
I like that L-3 Communications Holdings (NYSE: LLL) carries a solid 6.1% profit margin. I like even better that L-3 pays a 2.8% dividend and trades at 7.98 times earnings. But I really like that this space communications system company is trading right at its book value. I believe there could be a lot of value hidden here that's worth taking a deeper look at.
Coming Back to Earth
The defense and space industries may be speculative at times. After all, they are vulnerable to a host of budget cuts, particularly depending on who enters the White House next year. However, each of these companies has held its own through some of the worst economic years in recent history to get where they are right now. With strong profit margins, low multiples, and reasonably reliable dividends, the defense and aerospace sectors are worth checking out.
pongun has no positions in the stocks mentioned above. The Motley Fool owns shares of General Dynamics and L-3 Communications Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.