When Government Lobbies for Your Stock
In the first visit of an American defense secretary to Brazil in seven years, Leon Panetta pushed the country on Wednesday to approve the purchase of 36 Super Hornet fighter jets made by Boeing (NYS: BA) . All told, the contract is said to be worth approximately $4 billion.
Needless to say, this type of lobbying is great news for Boeing investors. But the benefits may not stop there, as the move comes in the course of a more widespread campaign by Washington to improve relations between the two countries.
"This offer, which has strong support of the United States Congress, contains an unprecedented advanced technology sharing that is reserved for only our closest allies and partners," Panetta said. "We have put forward a very strong offer. It is an offer that reflects how important this partnership is to the United States."
In light of this, it's easy to see how other defense contractors like Lockheed Martin (NYS: LMT) and Northrop Grumman (NYS: NOC) could benefit equally down the road. And as you can see in the chart below, all but Lockheed clearly need the help, as both Northrop and Boeing are trailing the S&P 500 (NYS: SPY) over the past five years.
It's no exaggeration to say that the Brazilian economy has been one of the world's few economic bright spots in the last few years. While the United States continues to lick its wounds from the financial crisis, and Europe descends further into its own economic abyss, Brazil has rocketed ahead.
In 2010, the South American country's economy grew at a blistering pace of 7.5%. And even after its government took steps to cool the aggressive expansion, its output still grew at an annual rate of 2.7% last year.
Foolish bottom line
With large parts of the world facing recessions, an expansion into a fast-growing market like Brazil is precisely what American exporters like Boeing, Lockheed Martin, and Northrop Grumman need.
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At the time this article was published Fool contributor John Maxfield does not have a financial interest in any of the companies mentioned above. The Motley Fool owns shares of Lockheed Martin and Northrop Grumman.The Motley Fool has sold shares of SPDR S&P 500 short. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.