No matter who wins the White House, defense spending will continue and these 4 stocks in the sector look like the strongest picks now.
Election Day has come and gone and it’s still not clear if Biden or Trump will clinch the White House.
But no matter who our next Commander In Chief is, one thing is for certain: America will still need to defend herself and modernization of our military remains a top priority for the nation.
“No matter who wins, we still need to protect our country,” said Mark Tepper, president of Strategic Wealth Partners. “And there’s also no doubt that the new age of warfare is more digital, more cyberattacks, less tanks, less aircraft carriers.”
While Tepper acknowledged that many investors are concerned that a Biden victory could mean less defense spending, but he argues that if the Democrat takes the White House, it will actually likely mean a shift in investment toward defense modernization.
“That’s where I’d want to be no matter who wins the White House,” Tepper continued. “A company we own, Leidos (NYSE: LDOS),… they provide cybersecurity IT and analytics for defense and intelligence purposes. The U.S. government makes up 80% of their revenues.”
While Leidos shares are down more than -27% from their February high, the stock has broken out of a falling wedge this week, in a bullish sign for the stock.
Morgan Stanley analyst Kristine Liwag said in research report this week that, “The broader global security landscape suggests that a Democrat or Republican win requires higher U.S. modernization spending. U.S. military superiority is no longer guaranteed according to the Department of Defense. Hence, we expect Defense Investment Accounts to grow regardless of political control.”
Liwag’s top pick in the defense sector is Northrop Grumman (NYSE: NOC). She issued a Buy rating for the stock with a $470 price target – nearly 53% higher than the price as of this writing.
Other top defense picks on the Street are Mercury Systems (NASDAQ: MRCY), and L3Harris Technologies (NYSE: LHX), the latter of which has a 100% Buy-rating ratio.