These Defense Stocks Just Got Another Big Boost

Written By Jason Simpkins

Updated May 15, 2024

After months of delay, funding for badly needed foreign aid appears to be on the move. 

There are three bills in total, providing $60.8 billion to support Ukraine, $26.4 billion to support Israel, and $8.1 billion to support Taiwan and other partners in the Pacific who are fearful of China’s encroachment. 

Another $9.1 billion has been tacked on for Palestinian humanitarian needs, as well.

It’s long overdue. 

Ukrainian forces fought valiantly to repel Russia’s initial invasion, but there’s no way they can continue to hold out absent Western — and specifically U.S. — aid.

The main thing is a shortage of ammunition that’s sidelined some of Ukraine’s most effective weapons. Replenishing those stocks will ensure the country can continue its fight to preserve its existence. 

Meanwhile, Israel’s war against Hamas quickly bled into a broader regional conflict with Iran and its proxy groups. And the past few weeks have been especially tense. 

First, Israel bombed an Iranian consulate in Syria, killing two of the country’s top generals. Iran responded last week by shelling Israel with hundreds of missiles and drones. 

That attack was largely ineffective, but Israel nevertheless retaliated yesterday by targeting Iran with a missile barrage of its own. 

Again, neither of these attacks achieved much of anything. But the exchange marks yet another escalation in hostilities. Things are clearly trending in the wrong direction there.

And finally, the aid to Taiwan and other Pacific allies is the least urgent but also vital to maintaining long-term stability in one of the few areas of the world that hasn’t yet devolved into a bloodbath.

So if you think deterring China from invading Taiwan is a good thing… 

If you support Israel’s continued existence…

If you think defending democracy in Europe from a murderous dictator is a worthwhile effort… 

Or if you simply believe what’s good for America’s allies is good for America and the world at large… 

Then this aid package is a good thing. 

It’s also a good thing if you’re invested in defense stocks, like I am. 

Companies like Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), and RTX Corp. (NYSE: RTX) are the only real beneficiaries of global conflict. And they have been benefiting. 

It’s no surprise, then, that Lockheed is up 5.5% in the past month, while RTX (which I’ve been touting for months) is up 7.25% in that time.

Not for nothing, Lockheed Martin makes the F-35 fifth-generation fighter, which is active in Israel and helped thwart last weekend’s attack. And RTX is a partner with Rafael on the country’s Iron Dome, manufacturing its Tamir missiles.

In fact, RTX and Rafael recently announced plans for a new $33 million production facility in Arkansas that will produce Tamir and SkyHunter missiles.

That’s exactly the kind of investment these companies can make when they’re supported by spending packages like the one Congress is now on track to pass. 

Indeed, despite all the crying and whining about money and aid being “sent” to Ukraine, the majority of that spending (about 60%) actually stays right here at home. 

It goes to defense contractors who have used it to expand manufacturing capacity, create jobs, and ensure America’s security, and to government agencies (and employees) who use it to further our nation’s interests on the world stage.

Better still, the trend toward higher global defense spending continues to accelerate. 

President Biden just asked Congress for a record-high $895 in defense spending for FY25. That would be the fifth straight year in which the U.S. has spent a record amount on defense.

Our allies in Europe are ramping up spending too, as the NATO alliance collectively will spend more than $1 trillion on defense this year. 

Indeed, a record 18 NATO members are on track to hit the alliance’s oft-stated target of 2% of GDP this year — up from just three in 2014. And some — those most threatened by Russia’s aggression — are exceeding it. 

Poland, for example, is spending roughly 4% of its GDP on defense this year. It’s also lobbying the alliance to raise its spending guidance from 2% to 3% of GDP. 

That makes defense contractors a very strong bet, not just now but over the long haul. Because we’re not going back to shrinking defense budgets any time soon. 

After all, the world isn’t getting any safer. 

And if you really want to profit, you should check out my investment service Secret Stock Files, where I cover cutting-edge defense tech suppliers. 

For example, I was recommending AI defense partners years ago, well before the latest craze, resulting in multiple triple-digit gains. 

We’ve also banked huge gains on small drone companies that are benefiting from the shift toward unmanned vehicles.

So check out my latest report here if you haven’t already.

Fight on,

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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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