S&P 500   4,587.71 (+0.44%)
DOW   36,182.83 (+0.65%)
QQQ   389.53 (+0.18%)
AAPL   190.93 (+0.52%)
MSFT   373.35 (-1.47%)
META   322.01 (-1.57%)
GOOGL   131.44 (-0.82%)
AMZN   146.29 (+0.14%)
TSLA   237.86 (-0.92%)
NVDA   468.27 (+0.12%)
NIO   7.19 (-1.10%)
BABA   73.64 (-1.66%)
AMD   120.80 (-0.30%)
T   16.62 (+0.30%)
F   10.49 (+2.24%)
MU   75.82 (-0.39%)
CGC   0.62 (+10.00%)
GE   122.76 (+0.79%)
DIS   92.38 (-0.33%)
AMC   6.84 (+2.86%)
PFE   29.22 (-4.10%)
PYPL   59.29 (+2.92%)
XOM   103.09 (+0.34%)
S&P 500   4,587.71 (+0.44%)
DOW   36,182.83 (+0.65%)
QQQ   389.53 (+0.18%)
AAPL   190.93 (+0.52%)
MSFT   373.35 (-1.47%)
META   322.01 (-1.57%)
GOOGL   131.44 (-0.82%)
AMZN   146.29 (+0.14%)
TSLA   237.86 (-0.92%)
NVDA   468.27 (+0.12%)
NIO   7.19 (-1.10%)
BABA   73.64 (-1.66%)
AMD   120.80 (-0.30%)
T   16.62 (+0.30%)
F   10.49 (+2.24%)
MU   75.82 (-0.39%)
CGC   0.62 (+10.00%)
GE   122.76 (+0.79%)
DIS   92.38 (-0.33%)
AMC   6.84 (+2.86%)
PFE   29.22 (-4.10%)
PYPL   59.29 (+2.92%)
XOM   103.09 (+0.34%)
S&P 500   4,587.71 (+0.44%)
DOW   36,182.83 (+0.65%)
QQQ   389.53 (+0.18%)
AAPL   190.93 (+0.52%)
MSFT   373.35 (-1.47%)
META   322.01 (-1.57%)
GOOGL   131.44 (-0.82%)
AMZN   146.29 (+0.14%)
TSLA   237.86 (-0.92%)
NVDA   468.27 (+0.12%)
NIO   7.19 (-1.10%)
BABA   73.64 (-1.66%)
AMD   120.80 (-0.30%)
T   16.62 (+0.30%)
F   10.49 (+2.24%)
MU   75.82 (-0.39%)
CGC   0.62 (+10.00%)
GE   122.76 (+0.79%)
DIS   92.38 (-0.33%)
AMC   6.84 (+2.86%)
PFE   29.22 (-4.10%)
PYPL   59.29 (+2.92%)
XOM   103.09 (+0.34%)
S&P 500   4,587.71 (+0.44%)
DOW   36,182.83 (+0.65%)
QQQ   389.53 (+0.18%)
AAPL   190.93 (+0.52%)
MSFT   373.35 (-1.47%)
META   322.01 (-1.57%)
GOOGL   131.44 (-0.82%)
AMZN   146.29 (+0.14%)
TSLA   237.86 (-0.92%)
NVDA   468.27 (+0.12%)
NIO   7.19 (-1.10%)
BABA   73.64 (-1.66%)
AMD   120.80 (-0.30%)
T   16.62 (+0.30%)
F   10.49 (+2.24%)
MU   75.82 (-0.39%)
CGC   0.62 (+10.00%)
GE   122.76 (+0.79%)
DIS   92.38 (-0.33%)
AMC   6.84 (+2.86%)
PFE   29.22 (-4.10%)
PYPL   59.29 (+2.92%)
XOM   103.09 (+0.34%)

3 Stocks That Really, Really Need the Defense Bill to Pass

defense stocks

Key Points

  • A government shutdown may present short-term pain but a long-term opportunity in defense stocks. 
  • Any disruption to the defense sector reminds investors of Palantir's dominance, and reliance, on defense contracts. 
  • Significant pullbacks in two blue-chip defense stocks may set the stage for a year-end rally.  
  • 5 stocks we like better than Morgan Stanley

Will the government shut down? Despite the hot rhetoric, it doesn't seem possible. One reason for that is its effect on our defense industry. Funding for Ukraine as part of an omnibus defense bill is one of the key points of contention for lawmakers.  

However, with multiple current and potential flashpoints across the globe, it's possible that some point of temporary funding would be put in place even if the government does shut down. That hasn't mattered much to investors who continue to sell defense stocks. Many blue-chip stocks are down sharply in 2023.  

But as Morgan Stanley NYSE: MS points out, the defense sector has performed well when there's been a government shutdown or even the threat of one. That means it could be an ideal time to buy some of these names, which, in some cases, are trading near their 52-week lows.  

This Company Needs Their Reality to Match Its Perception 

First up is Palantir Technologies, Inc. NYSE: PLTR. The company and the stock have had doubters since it went public via a direct listing. An overarching concern is the percentage of Palantir's business that comes from government contracts.  

Currently, that percentage is around 51%. That's down significantly from what it was a few years ago. However, it's still a significant percentage. And with PLTR stock down about 32% since closing at a high of $19.99 on August 1, 2023, investors are already in a selling mood. Any concern about disruption to the company's income and earnings could push the stock lower in the short term. 

PLTR stock is above its 200-day simple moving average (SMA). And as of this writing, the stock is bouncing around $14.11. Over the last six months, that level has been a key support level. Traders should wait to see if the stock falls below that level. However, if you're a long-term investor who believes the company's Department of Defense (DoD) income won't be disrupted significantly, this could be a buying opportunity. 


Any Disruption Seems to Be Priced into This Blue-Chip Stock 

Lockheed Martin Corporation NYSE: LMT is the nation's largest revenue and market cap defense contractor. 50% of the company's total revenue comes from the DoD. That makes it particularly susceptible to a government shutdown.

However, LMT stock is down 15% for the year and is trading well below its 200-day SMA. However, nothing in the company's earnings reports or fundamentals would justify it underperforming the broader market. That suggests that any disruption from a government shutdown is priced into the company's stock.  

Let's look at some of the fundamentals. LMT stock trades for under 16x earnings. That's lower than it was in late August. Earnings are expected to rise by 4% in the next 12 months. And owning the stock comes with a reliable dividend that has been growing for 20 consecutive years and has a 2.91% yield.  

This Stock is Trading at a Buyable Bottom 

Northrop Grumman Corporation NYSE: NOC is down over 21% in 2023 and is now trading near its 52-week lows. To be fair, the company is posting a slight year-over-year decline in earnings in the first two quarters of 2023. Still, like Lockheed Martin, little evidence in the company's fundamentals and earnings report warrants such a sell-off.  

Instead, this appears to be a case of investors holding to the belief that defense spending is likely to be cut. In fact, NOC stock dropped sharply after the government of Poland announced that it was no longer supportive of the Ukraine war. Northrop is providing Poland with its Integrated Battle Command System (IBCS), which can help the country "sense, identify, track and eliminate air and missile threats." 

NOC stock is currently trading at a level of support that has been in place since early August. However, with the company forecasting a 9% increase in earnings in the next 12 months, something has to give. In the short term, a shutdown could push the stock lower, but a quick resolution will likely make NOC stock a strong fourth-quarter performer. 

Should you invest $1,000 in Morgan Stanley right now?

Before you consider Morgan Stanley, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Morgan Stanley wasn't on the list.

While Morgan Stanley currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Morgan Stanley (MS)
2.8623 of 5 stars
$80.60+1.6%4.22%14.44Moderate Buy$93.43
Palantir Technologies (PLTR)
1.5681 of 5 stars
$19.99-0.3%N/A333.22Reduce$13.25
Lockheed Martin (LMT)
2.028 of 5 stars
$449.70+0.4%2.67%16.43Hold$484.07
Northrop Grumman (NOC)
1.9862 of 5 stars
$479.57+0.9%1.56%15.73Hold$500.20
Compare These Stocks  Add These Stocks to My Watchlist 

Chris Markoch

About Chris Markoch

  • CTMarkoch@msn.com

Editor & Contributing Author

Retirement, Individual Investing

Experience

Chris Markoch has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Value investing, retirement stocks, dividend stocks

Education

B.A., The University of Akron

Past Experience

InvestorPlace


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