Rude awakening today. Everyone thought that you could skate past the budget talks if you were in the military, that the unthinkable wouldn't come to pass and that programs would not be killed. Suddenly you have people panicking, and that was hard to jibe with the headlines that there were no real cuts. In fact, the cuts seem very for-real. Or, to put it another way, it looks like some programs may not be funded.
Throughout this weird presidency, I have felt that the generals are getting anything they want. The questioning of any of the commitments or spending for war or for helping rebuild countries that are quasi-friends just doesn't happen. I figured the same thing would be the case with the military's big programs, and that, in the end, everything gets funded. Doesn't look that way. But you never know when this industry will pull a rabbit out of its hat. General Dynamics ($GD) has been the most steady player in the group. Not the cheapest, but the most consistent.
On the other hand, Raytheon ($RTN) and Lockheed Martin ($LMT) have dividends of almost 4% and 4%. L-3 Communications ($LLL) has an activist making trouble.
To me, this is a case where you have to see the whites of their eyes. I don't see any earnings momentum here, and "cheap" hasn't worked. But if Lockheed or Raytheon go to 4.5%, then I would buy them, but without dividend protection I would hold off on the others just in case we are going to read some article in some major publication that says the big weapons systems will be killed. Until you get that definitive slam, you are going to have to gasp before you pick up the paper or go online for fear that you'll be garroted by the piece that explains the obvious.
Bat on your shoulder. But getting there!
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