Download now: The Downfall of Cable, and the Rise of 5G!

U.S. and Its Big Defense Budget

Written by Monica Savaglia
Posted May 31, 2022

Welcome back to the workweek. I hope you were able to relax and recharge over the extended holiday weekend. I’m recharged and ready to get back at it! And I had some time to think about some opportunities for you...

I was doing some research over the weekend because my brain is always “on,” even when I might be off work. Well, I came across an article from Reuters that talked about how the U.S. Army recently signed a deal to buy $687 million of anti-aircraft Stinger missiles to help replenish supplies in Ukraine. These missiles are made by Raytheon Technologies (NYSE: RTX). The contract between Raytheon and the U.S. Army is for 1,468 Stingers, with the delivery window taking as long as 30 months. 

Since February, the U.S. has shipped about 1,400 Stingers to Ukraine. The war in Ukraine started back at the end of February and is ongoing. Last week, Ukraine’s foreign minister pleaded for “weapons, weapons, and weapons again.” Ukraine needs the sophisticated weaponry that the West possesses to stop Russia’s advances in the country. Ukraine’s President Zelensky said:

Pressure on Russia is literally a matter of saving lives. And every day of delay, weakness, various disputes or proposals to “appease” the aggressor at the expense of the victim is new killed Ukrainians. And new threats to everyone on our continent. 

It’s been three months since Russia invaded Ukraine. Ukraine needs more supplies to fight off Russia’s advances on Ukraine territory. The U.S. does not want Russia to advance and will do what it needs to do to assist Ukraine in this war. Earlier this month, more than $40 billion in additional aid to Ukraine was approved by Congress. 

U.S. Offers Aid to Ukraine

The total aid comes to about $54 billion when combining this new aid package with the one that passed in March for Ukraine. According to the Ukraine Supplemental Appropriations Act of 2022 and the Additional Ukraine Supplemental Appropriations Act of 2022, about $20.6 billion of that has been allocated to weapons and other supplies along with U.S. military deployments and intelligence. This is a hefty sum, but it’s a necessary amount to spend to help Ukraine. Even without this war, America has a very large defense budget. 

According to Statista, the U.S. led the ranking of countries with the highest military spending in 2021, with a total of $801 billion spent. Now, if we take a look at America’s defense budget, according to the U.S. Congressional Budget Office, the outlays for defense will rise from $596 billion in 2014 to $915 billion by 2031. Additionally, between 2013 and 2022, it’s projected that the U.S. will spend $392 billion on nuclear weapons, $97 billion on missile defenses, and $100 billion on environmental and health costs. 

The defense and military budget is a crucial component of America. I don’t think those budgets will be reduced in the foreseeable future. If anything, the budget could increase. Especially as more conflicts arise in other countries or to assist America’s allies. Not to mention America has to protect itself. It needs to keep its defense top-notch. And defense companies like Raytheon Technologies are supplying the U.S. military with its products and services.

Raytheon Technologies is an aerospace and defense company that offers advanced systems and services for commercial, military, and government customers worldwide. What makes Raytheon unique is that it doesn’t just depend on the U.S. to be its customer — about 35% of its sales also come from commercial users. Then there’s about 62% of its business tied to sales from the U.S. I can’t emphasize it enough: Defense stocks are set to be in high demand. 

A Big Budget for U.S. Defense Offers You New Opportunities...

With that being said, if you’re interested in learning about investment opportunities in the defense industry, then let me connect you with my colleague Jason Simpkins. He has been focused on this industry for some time and has spent many hours researching companies that I think could be solid investment opportunities for an investor like yourself. 

As I showed you earlier, the U.S. is a big spender in this industry and I don’t see those budgets decreasing anytime soon, especially when so many conflicts are going on around the world. America will always be the nation that supports its allies and will always prioritize its defenses against its adversaries. 

My dad was in the U.S. Coast Guard and I grew up hearing its motto, “semper paratus,” which is a Latin phrase that means “always ready.” America will need to be ready now and in the future. So I see the defense industry as a major opportunity for investors right now and in the long term. Here’s your chance to pick Jason Simpkins’ brain and see what kind of investments are emerging.

Check out his newsletter, Wall Street's Proving Ground, here.

 

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

Buffett's Envy: 50% Annual Returns, Guaranteed