Mideast Turmoil Saved This Stock

Written By Jason Simpkins

Posted January 13, 2024

Last year, RTX Corp. (NYSE: RTX) hit a massive snag.

The company found that 3,000 Pratt & Whitney jet engines needed inspections for potentially flawed components. 

That caused the defense company’s stock to tank. It slid from a high point of more than $100 per share to a low of about $69 on October 6. 

Of course, it was on October 7 that Hamas launched its attack on Israel — killing and kidnapping their way into not just a war but perhaps the worst humanitarian crisis of the 21st century.

It’s easy to say no one wins in a situation like this, but in reality, that’s simply not true. 

Defense contractors like Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC) experienced their best trading days in decades.

Raytheon stock climbed more than 5% on October 9 — the first day of trading following the attack — and it’s climbed roughly 23% in the three months since.

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Even among defense contractors, Raytheon is uniquely positioned to benefit from the Middle East’s misfortune. 

It builds the Tamir interceptors for Israel’s Iron Dome — the most active air defense system in the world. 

In fact, the Iron Dome is seeing so much action that RTX and Israeli partner Rafael just announced plans for a new $33 million production facility in Arkansas. 

The plant will manufacture the Tamir missiles as well as an American variant called SkyHunter.

Raytheon is also one of four companies that manufactures Tomahawk missiles, which are the standard sea-to-surface munition of the U.S. Navy. 

Tomahawks are cruise missiles capable of delivering a 1,000-pound conventional warhead hundreds of miles inland. And they fly on a non-linear, GPS-guided path to evade defenses

America first deployed Tomahawks in combat in Operation Desert Storm in 1991, and they’ve been a mainstay in the region ever since. 

Not surprisingly, they’re among the munitions now being deployed to combat the Houthi rebels harassing cargo ships in the Red Sea. 

That situation is also spiraling out of control. 

The Houthis attempted their largest attack yet this week, firing 21 drones and missiles at a U.S. ship they accused of providing aid to Israel.

The attack was especially brazen because the United States and its Western allies issued a staunch warning to the Houthis last week after American forces repelled an attack on a Maersk cargo ship, sinking three ships and killing 10 militants in the process.

America and its allies followed through on their warning with a large-scale bombing run against Houthi targets in Yemen Friday morning.

Now the Iranian-backed rebels are vowing retaliation for that in yet another sign of escalation.

There’s no telling where that will lead, but it will undoubtedly mean more work for Raytheon, which is already busy churning out missiles. 

Just this week, the company announced a new $345 million order for more than 1,500 StormBreaker missiles.

The StormBreaker is an air-to-surface smart bomb that can hit moving targets in all weather conditions and low visibility environments. 

Separately, RTX also announced a $34 million deal to support Sea Sparrow missile systems for the U.S., Japanese, and Chilean navies.

Designed to be a lightweight “point defense” weapon, the Sea Sparrow can be used as both a surface-to-air and air-to-air missile.

It can also be retrofitted easily to existing defense systems — a benefit that has served Ukraine well in its war against Russia. 

Raytheon also locked in a $9.6 million order to deliver its NMESIS (Navy Marine Expeditionary Ship Interdiction System) to the Marines.

The NMESIS is a land-to-sea anti-ship missile system that’s been customized exclusively tailored for the  Marine Corps (USMC).

It’s extremely versatile in that it can be mounted atop the chassis of an unmanned tactical vehicle.

Deals like these add up. They’ve already helped Raytheon rebound from an embarrassing product recall last year, and now they’re poised to send the stock shooting even higher.

Of course, if you really want to profit from the defense sector, you should check out my latest report on a cutting-edge initiative to pair manned fighter jets with companion drones. 

You can find out more about that here.

Fight on,

Jason Simpkins Signature

Jason Simpkins

Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more…

In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page.

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