Both stocks trade at less than 15 times projected earnings for the current year.
The prime beneficiaries of the Administration's spending priorities will likely be the leading defense companies. Such substantial projects would likely improve profit margins at the companies, allowing earnings to move up faster than revenues. But if the defense sector is telling us anything about the future, it's that we're going to be in Iraq awhile longer. Northrop, for instance, is a leader in airborne laser technology, which would allow high-flying airplanes to destroy targets with a beam of intense light. Both stocks trade at less than 15 times projected earnings for the current year. Similarly, they have no investment banking or other financial relationships with them. Though some have compared the war in Iraq to Vietnam, one area of difference is the behavior of stocks. While many companies in the group trade at 16 to 20 times next year's earnings, United Defense trades at 12.
Other factors are likely to offset any increase in spending a war might bring. All told, spending on the military could rise at three times the rate of inflation. Steven Drobny reveals insights from the hedge fund all-stars. Prime beneficiaries include General Dynamics and Northrop Grumman, both of which are on the Sivy 70 list. At Columbia Records, John Hammond made some of the greatest discoveries in American music. Both companies are also likely to profit from high-tech initiatives.
It's not the time Congress picks to have contentious, difficult battles over funding.