The massive rally driven by the Bank of England’s ridiculous foray back into quantitative easing was a one and done. Now investors are faced with the stark reality of ending the quarter with a deluge of selling from institutional accounts all over Wall Street. With the final second-quarter gross domestic product reading coming in at the expected level of −0.6%, technically we are indeed in a recession now. With all the additional data (low first-time applications for unemployment) giving the Federal Reserve some cover, you can almost count on a 75-basis-point increase in the federal funds rate in early November.
So where should investors look to deploy capital in such an environment? We have always maintained that the best offense in difficult times is good defense (as in defense and aerospace stocks). While the football metaphor may not be in any economics 101 textbooks, it has proven to play out well for investors over the past 20 years.
With the Russian-Ukrainian war now grinding into its eighth month, not only are arms and heavy equipment being hustled to Ukraine, but many countries have taken the aggression very seriously and are adding to their own arsenals. The Japanese ruling party has called for the doubling of defense spending in the wake of Chinese saber-rattling over Taiwan. European nations are trending the same way.
We screened our 24/7 Wall St. aerospace and defense research database looking for the top stocks that are Buy-rated on Wall Street and come with solid and dependable dividends. Six top picks hit our screens. While they are rated Buy, it is important to remember that no single analyst report should be used as the sole basis for any buying or selling decision.
Like other major defense contractors, General Dynamics Corp. (NYSE: GD) looks poised to deliver solid numbers and guidance the rest of this year and perhaps beyond. It is engaged in business aviation, land and expeditionary combat vehicles and systems, armaments, munitions, shipbuilding and marine systems, and information systems and technologies.
Major products include Virginia-class nuclear-powered submarine and Ohio class replacement, Arleigh Burke-class Aegis, Abrams M1A2 tank, Stryker 8-wheeled assault vehicle, medium-caliber munitions and gun systems, tactical and strategic mission systems.
Top analysts expect the company to modestly beat earnings expectations for the third quarter and possibly raise guidance. They also expect solid numbers from the Gulfstream division.
Investors receive a 2.27% dividend. Wells Fargo has a price target of $249 on General Dynamics stock. The consensus target is higher at $263.94. The shares closed on Thursday at $214.43 apiece.
Huntington Ingalls Industries
Spun off from Northrop Grumman in 2011, this is a premier military shipbuilding company. Huntington Ingalls Industries Inc. (NYSE: HII) engages in designing, building, overhauling and repairing military ships in the United States.
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