Pentagon Budget Cuts: What's Next for Defense Stocks?
Apparently the Super Committee is already in need of a Super Duper Committee. Secret handshakes and all.
The bipartisan super committee is charged with finding an additional $1.5 trillion in debt savings over a 10-year period. But according to CNNMoney, "The super committee has met exactly one time and already one of the group's 12 members is threatening to blow up the process."
The reason? Republican Jon Kyl of Arizona took a bold stand against defense cuts. In interest of the military, he thinks the budget should be off limits.
The Republican stance has typically been to increase military spending, and for years the budget has experienced steady increases. But America's drawn-out armed conflicts are winding down, and the national debt has grown to epic proportions. Whether Jon Kyl wants it or not, the defense budget may start to level off, even face cutbacks.
"Overall defense spending accounts for 20% of the entire federal budget. Last year, the Pentagon spent $530 billion, without even counting war costs... Already, the debt ceiling deal struck by the nation's top lawmakers includes $350 billion in cuts to the defense budget over the next decade."
Although the Super Committee is not micromanaging where budget cuts are being made, Kyl apparently fears the committee will try to wring more savings out of the Pentagon to help add up the numbers.
Interested in how budget cuts will affect Aerospace and Defense stocks?
We were, which is why we put together a screen of Aerospace/Defense stocks that have been experiencing significant levels of net insider buying over the past six months.
These insiders don't seem too concerned about potential budget cuts -- do you think they've got it right? (Click here to access free, interactive tools to analyze these ideas.)
1. HEICO (NYS: HEI) : Engages in the design, manufacture, and sale of aerospace, defense, and electronic related products and services in the United States and internationally. Over the last six months, insiders were net buyers of 20,000 shares, which represents about 0.06% of the company's 33.99M share float.
2. Kaman (NAS: KAMN) : Operates in the aerospace and industrial distribution markets. Over the last six months, insiders were net buyers of 6,500 shares, which represents about 0.03% of the company's 25.90M share float.
3. LMI Aerospace (NAS: LMIA) : Provides design engineering services, structural assemblies, kits, and components to the aerospace, defense, and technology markets primarily in the United States. Over the last six months, insiders were net buyers of 2,452 shares, which represents about 0.03% of the company's 8.66M share float.
4. Breeze-Eastern (NYS: BZC) : Designs, develops, manufactures, sells, and services lifting and restraining products for specialty aerospace and defense applications. Over the last six months, insiders were net buyers of 13,050 shares, which represents about 0.45% of the company's 2.89M share float.
List compiled by Eben Esterhuizen, CFA.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Becca Lipman and Eben Esterhuizen do not own any of the shares mentioned above. Insider data sourced from Yahoo! Finance, all other data sourced from Finviz.
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