Three defense contractor stocks to buy give investors ways to profit from wars raging in the world.
The three defense contractor stocks to buy are in the Washington, D.C., area and recently were visited by equity research analysts of Chicago-based investment firm William Blair. All three of the defense contractors are rated to “outperform” the market.
Demand is rising and staying strong for everything from submarines and space launch vehicles in defense to business jets in commercial aerospace, according to BofA Global Research. However, supply chain and capacity cause constraints.
Even though supply chain and labor have improved, BofA wrote in a recent research note that many companies highlighted these issues as pain points.
Three Defense Contractor Stocks to Buy: Booz Allen Hamilton
Booz Allen Hamilton, a McLean, Virginia-based recommendation from the Chicago-based investment firm William Blair, traded up after reporting fourth-quarter revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) above consensus analysts’ estimates during late May. The company’s management issued its fiscal 2025 guidance above consensus on the strength of its pipeline of opportunities and hiring trends offset by potential election and geopolitical disruptions.
Booz Allen’s artificial intelligence (AI) and machine learning (ML) Databricks partnership for the Advana platform has been a major growth driver, DiPalma wrote in a recent research note. The industry continues to benefit from a strong 2023 defense budget, a favorable hiring environment and wage inflation, he added.
“Headcount trends and strong bookings will likely continue to be the main drivers of revenue growth, and both are in the firm’s favor,” DiPalma wrote. “Over the past few years, Booz Allen has won elite contracts for cybersecurity (Thunderdome, CDM DEFEND, CyPrESS), data analytics (Advana, CDC DMA), artificial intelligence (EMAPS, the JAIC, Space Force remote sensing), and augmented reality (Army digital soldier, soldier as a service). We view the stock as artificial intelligence at a reasonable price (AARP) and see upside of greater than 15% over the next year.”
Chart courtesy of www.stockcharts.com
Booz Allen Hamilton Has Other Backers
Another fan of Booz Allen Hamilton is Jim Woods, a former Army paratrooper who has recommended the company profitably in the past. Woods has a large defense contractor in the Income Multipliers portfolio of his Successful Investing newsletter but he also likes Booz Allen Hamilton.
Jim Woods, a former U.S. Army paratrooper, co-heads Successful Investing and Fast Money Alert.
As a former military man, Woods has a keen interest in defense and cyberspace, following them closely for subscribers of his Successful Investing newsletter and his trading services such as Bullseye Stock Trader, High Velocity Options and Fast Money Alert. The latter service he co-heads with Mark Skousen, PhD, an economist who is a Presidential Fellow at Chapman University, as well as the head of the Forecasts & Strategies investment newsletter.
Ben Franklin scion Mark Skousen, who heads Forecasts & Strategies, talks to Paul Dykewicz.
Subscribers of Bullseye Stock Trader collected a profit of 21.67% in 2019 when Woods recommended the stock for slightly more than three months. He also recommended related call options in Bullseye Stock Trader that produced a profit of 166.67%.
Fast Money Alert subscribers gained 9.59% after only about a month late in 2022 with a follow-up recommendation of Booz Allen Hamilton. A related call option recommendation in Fast Money Alert for Booz Allen Hamilton produced a 239.27% profit in less than one month.
Bryan Perry, who leads the Cash Machine investment newsletter, generated a 25% gain for his subscribers in the Breakout Options Alert advisory service in less than three weeks last May.
Bryan Perry leads the Breakout Options Alert advisory service.
Michelle Connell, owner and president of Dallas-based Portia Capital Management LLC, also favors Booz Allen Hamilton. Focused on wealth management for private investors and non-profit institutions, Connell advised that
The company has “robust fundamentals” and has generated more than a half billion dollars in free cash flow every year for the last 10 years, Connell informed me. Its return on equity is well over 50%, she added.
Plus, the company’s revenue growth is in excess of 15% a year. Expect this to increase given the demand for AI-related consulting services, Connell continued.
The stock’s dividend yield of 1.28% likely will increase, given the amount of demand for AI as well as the strong free cash flow, she added. Plus, there is no short interest in the stock, adding that means no one is willing to go against BAH and its stock performance, Connell concluded.
Michelle Connell leads Dallas-based Portia Capital Management.
Three Defense Contractor Stocks to Buy: CACI International
The second of three defense contractor stocks to buy is CAIC International Inc. (NYSE: CAIC), of Reston, Virginia. It is rated outperform by William Blair’s DiPalma.
CACI on June 10 received good news when NASA announced it awarded the company a contract to serve its Consolidated Applications and Platform Services (NCAPS) program. CACI’s gain is a loss for other vendors.
The $2 billion, eight-year IDIQ consolidates 10 existing IT services contracts to standardize and centralize NASA’s IT services. DiPalma wrote that CACI has won six billion-dollar awards in the past 18 months, more than any of its government technology peers.
In addition to NASANCAPs, recent billion-dollar contract wins include the $2.4 billion FocusedFox, $1.2 billion Spectral, $5.7 billion EITaaS, $1.3 billion ECS3 and the $1.3 billion USAfricom ELITE, DiPalma wrote. CACI’s backlog was up over 13% to $29 billion at the end of March, he added.
Chart courtesy of www.stockcharts.com
Three Defense Contractor Stocks to Buy: Parsons
The third of three defense contractor stocks to buy is Parsons Corporation (NYSE: PSN), of Chantilly, Virginia. The company has been winning U.S. government cybersecurity contracts, among others. Parson is rated an “outperform” opportunity.
The company also is engaged in machine learning data analytics software. For example, it is the lead contractor for the National Geospatial Intelligence Agency’s SAFFIURE program.
Another plus for Parsons is that DiPalma wrote that its margins are expected to keep trending up. Company management said that it is still in the “early innings” of that initiative.
Chart courtesy of www.stockcharts.com
Retired Pension Fund Chairman Likes Defense Funds as an Alternative
Bob Carlson, a former pension fund chairman who heads the Retirement Watch investment newsletter, suggested that investors consider exchange-traded funds (ETFs) focused on aviation and defense. Many of the investments Carlson recommends in his Retirement Watch newsletter feature ETFs.
Bob Carlson, who heads Retirement Watch, answers questions from Paul Dykewicz.
The three defense contractor stocks to buy are worth considering as demand for military equipment rises. Investors who are looking to invest in stocks that protect freedom have a trio of choices available to them.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Special Sale for Graduation Season! Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is great gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for reduced pricing on multiple-book purchases.
