4 interesting stocks from arms industry

The arms industry is one of the few sectors of the economy, gaining amid fears and increased likelihood of armed conflict. These increases are not accidental, because in times of economic uncertainty and military rivalry, armaments companies are the beneficiaries of large government contracts for the army. Even when the current situation in Ukraine calms down, some countries, including the US, are likely to consider increasing their budget for investment in military in order to deter any future threat of aggression. 

We have chosen 4 interesting companies from the arms sector. These companies are also involved in developing cutting-edge technology and participating in space exploration. 

General Dynamics (GD.US)

This is one of the key players in the US Aerospace & Defense sector. The company is engaged in the production of military equipment and cutting-edge technologies applicable to the military, space and information technology sectors. The company had $38.5 billion in revenue in 2021. The company participated in co-development of the F-16 Fighting Falcon jet with Lockheed Martin, of which it produced a total of over 4,500 units.

• General Dynamics company will start delivery of 250 state-of-the-art Abrams M1A2 tanks for the Polish army in 2022. Additionally, the company has also won two large contracts from the US Army: 

• A $229 million contract to supply 265,000 NGLD-M encryption keys to the US Army.  

• Worldwide Field Support (WFS) contract for USD 518 million. The order covered support for current and future C5ISR systems and maintenance of NATO military equipment. 

The company has 8 'Buy' recommendations and 4 'Hold' recommendations on Bloomberg terminal.

General Dynamics (GD.US) has been enjoying an upward move since early-November 2021. Stock reached the highest level since April 2018 this week and Russian aggression on Ukraine may provide more fuel for the gain of this stock. Source: xStation5

Northrop Grumman (NOC.US)

The company has been working with the US military since World War II, mainly with the air and space forces. The company also develops civilian technologies working with NASA. The company is also involved in equipment servicing and the patenting and production of state-of-the-art technologies for the army (e.g. SPOC Software Programmable Open Mission System Compliant).

Northrop Grumman's flagship designs include:

• The world's most modern and expensive strategic bombers B2 Spirit called ' flying wing', designed with Stealth technology

• E2 Advanced Hawkeye

• RQ4 and IFC-4 Triton drones

• Northrop Grumman was recently awarded a five-year contract worth approximately $1.4 billion to produce the Integrated Battle Command System (IBCS) for the Pentagon. Currently, the company is in the process of negotiating another contract with the Army worth approximately $700 million.

The company has 3 'Buy' recommendations and 6 'Hold' recommendations on Bloomberg terminal.

Shares of Northrop Grumman (NOC.US) have been pulling back in recent days. However, improved sentiment towards the arms sector following the Russian invasion on Ukraine may help the stock regain its shine. Source: xStation5

Lockheed Martin (LMT.US)

Lockheed Martin is another US giant in the defense sector. The company is credited with developing key air superiority aircraft for the US military, such as the F-35 Lightning, on which it collaborated with BAE Systems and Norhtrop Grumman. The planes are to replace the outgoing F-16 models. Lockheed was also the main designer of the F-22 Raptor, which confirms the company's enormous capabilities. 

• The company will execute a $19.3m prototype next-generation 5G 'OSIRIS' network for the US Marines. The execution has been prioritized for completion. The contract aims to integrate 5G technology in defense, space and virtual. .

• Lockheed has recently been negotiating the acquisition of Aerojet Rocketdyne, a company that builds rocket engines. Ultimately, the $4.4 billion takeover did not materialize. It was halted by the Federal Trade Commission out of fear of forming a monopoly in the market.

The company has 3 'Buy' recommendations and 7 'Hold' recommendations on Bloomberg terminal.

Lockheed Martin (LMT.US) trades near the upper limit of a mid-term trading range. Stock traded sideways for over a year and a half. However, Russian invasion on Ukraine could help the stock deliver an upside breakout from the range. Source: xStation5

BAE Systems (BA.UK)

BAE Systems is Europe's largest arms supplier. Due to the conflict between Ukraine and Russia, European security is in danger and some investors are expecting an increase in the number of contracts for the company. The company works closely with the US military. Its largest projects include designs such as the Eurofighter Typhoon air superiority aircraft used by European NATO forces, Astute submarines and the Concorde aircraft.

The company has recently signed a number of strategic contracts, including 

• A five-year $478m contract with the US Navy to provide advanced systems engineering and integration.

• A five-year $137 million contract to manage the lifecycle and maintenance of the US Navy's Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance and Reconnaissance (C5ISR) systems.

• A $60m contract to develop next-generation, radiation-resistant microelectronics in partnership with Intel. The programme's objective is to expand access to microelectronics technology for the US government and space industry.

The company has 6 'Buy' recommendations and 1 'Sell' recommendation  on Bloomberg terminal.

Shares of BAE Systems (BA.UK) jumped at the start of today's cash session, as arms companies gained on the launch of Russian invasion on Ukraine. Stock reached a daily high near 6.25 GBP per share - the highest level since late-February 2020. However, part of the gains was erased already and the price pulled back to the 6.10 resistance zone. Source: xStation5