Defense News Roundup: Boeing and Lockheed Ready to Blast Off
The U.S. military has a reputation as a somewhat secretive organization. But in one respect at least, the Pentagon is one of the most "open" of our government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open on its website.
So what has the Pentagon been up to this week?
DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2014. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). This past week, the Pentagon dialed things back a bit from the scale of last week's spending spree, but still managed to go ever so slightly over budget at $6.33 billion.
And what did they get for their (read: "our") money?
"What is it you want, Mary? What do you want? You want the moon?"
Well, they won't get the moon, exactly. But for $531 million, the Pentagon did manage to hire United Launch Services -- the private space launch duopoly run by Lockheed Martin and Boeing -- to produce a series of launch vehicles for U.S. Air Force and National Reconnaissance Organization satellite launches over the next few years. These funds will pay for two Atlas V rockets, and three Delta IVs.
You get a missile. And you get a missile. Every-body gets a missile!
Another win for Boeing came Tuesday, when the U.S. Navy arranged a $70 million contract with Boeing, to have the company supply it, and several allies with 12 new Harpoon anti-ship missiles, plus equipment upgrades for dozens more existing Harpoons already in inventory around the globe. In addition to our Navy, this contract will be shipping missile parts to buyers in Australia, Canada, Egypt, Germany, Japan, South Korea, Saudi Arabia, Taiwan, Turkey, and the United Kingdom.
Bombs away -- far away
Missiles are great for hitting faraway targets. But these days, you don't even need missiles to do that anymore. Raytheon has developed a new weapon -- the Joint Stand-Off Weapon, or JSOW -- which is basically a smart bomb, but one with a range that staggers the imagination. Dropped from a sufficiently high altitude, JSOW is capable of gliding as far as 78 miles before finally striking its target -- and that's all unpowered flight, with no rocket boosters required.
Shoe leather and laces for Das Boot(s)
That same day, the Navy awarded $122 million in funding for General Dynamics' Electric Boat division to make additional purchases of "long-lead-time materials" needed to build three new nuclear-powered fast attack submarines. As yet unnamed, the boats will all be of the Virginia-class, and are designated SSN 793, SSN 794, and SSN 795, respectively. Once constructed, these submarines will push the Navy 40% of the way through construction of its planned "Block IV" production round of Virginia-class subs.
Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's move on to one contract that may not yet be incorporated into defense contractors' stock prices.
On Thursday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to upgrade Norway's fleet of four C-130J Super Hercules transport aircraft. Assuming Congress approves the deal, the Pentagon will task defense contractors Lockheed Martin, Rolls-Royce, and General Electric with making necessary updates to software and hardware of the aircraft in order to "increase Norway's ability to contribute to future NATO operations and support U.S. national security interests."
It seems reasonable to believe that if upgrades are necessary for Norway's planes, then other countries may soon be needing them, too -- and if that's the case, then this could lead to more contracts, and more money for the defense contractors that implement them. With the C-130 platform being literally the most popular transport aircraft on the planet, with 1,131 planes in service around the globe, this could be a very big opportunity indeed.
Of course, this contract hasn't been officially announced yet, and it isn't common knowledge. Thus, few investors are factoring either it, or the possibility of similar future contracts into their valuations for the principal contractors. Very few people know about it -- except that now, you do.
You don't always have to look far to find good investments. Sometimes, profiting from our increasingly global economy can be as easy as investing in your own backyard -- and the Pentagon's helpful habit of publishing all its contracts daily as they're awarded certainly makes that easier.
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The article Defense News Roundup: Boeing and Lockheed Ready to Blast Off originally appeared on Fool.com.Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics, General Electric, Lockheed Martin, and Raytheon. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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