With Defense Budgets Ready to Grow, 3 Stocks Could Be Winners

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These days, most Americans and most investors are well aware we live in a dangerous world. After years of flat to lower U.S. Department of Defense budgets, that may be changing soon. In a new report, UBS estimates that the defense prime contractors will be growing at a low single-digit compounded annual growth rate over the next few years on slightly higher Defense Department budgets.

With Defense Department cash outlays expected to be released on June 10, investors have a chance to buy some of the top stocks that may benefit from a heavy exposure to government spending in advance of that date. The UBS team are very positive on three stocks, which are rated Buy.

General Dynamics

This company, like other major defense prime contractors, had a very solid year, and it makes the list at UBS as a top pick stock to buy. General Dynamics Corp. (NYSE: GD) is a worldwide aerospace and defense company with more than 96,000 employees worldwide. It operates through four business groups: Aerospace, Combat Systems, Marine Systems and Information Systems and Technology. The U.S. government is its largest customer, which could continue to bode well since Congress changed hands.

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General Dynamics stock has awarded its investors with returns of about 160% in the past decade. The company pays regular dividends and has a share repurchase plan in place. This is an outstanding stock for long-term growth portfolios.

General Dynamics investors are paid a 2% dividend. UBS has a whopping $163 price target, while the Thomson/First Call consensus target is lower at $159.20. Shares closed Friday at $140.11.