These companies shined under harsh circumstances
Russian President Vladimir Putin invited the world’s scorn upon the country’s invasion of Ukraine, resulting in a severe if not unprecedented isolation of his country. Russian defense stocks must be earning some hushed sideways glances due to the “special military operation” apparently not going to plan.
On the other side of the Atlantic (and the Pacific), U.S. and western-based defense stocks are enjoying an industry renaissance, to put it cynically. Few military experts anticipated that the Ukrainian resistance would put up this much of a fight — and be so devastatingly effective. That’s not to say that Ukraine hasn’t suffered severely, because it has. Still, love of the homeland combined with American weapons technology has done wonders.
Per a statement from the White House, the U.S. government will send an additional $800 million in security assistance to Ukraine. Under the plan, several diverse weapons systems will make their way to the embattled nation, including anti-aircraft and anti-armor missiles. Essentially, it’s Christmas time for defense stocks — even though we’re only heading into April, not December.
Ukrainians are making defense contractors look great, much like a nimble wide receiver putting his quarterback in the best possible light. Thus, these defense stocks represent a bright spot in an otherwise muddy market environment:
- Lockheed Martin (NYSE:LMT)
- Raytheon Technologies (NYSE:RTX)
- AeroVironment (NASDAQ:AVAV)
- Olin (NYSE:OLN)
- Booz Allen Hamilton (NYSE:BAH)
- DuPont (NYSE:DD)
- General Dynamics (NYSE:GD)
Defense Stocks to Buy: Lockheed Martin (LMT)
Developed under a joint venture between Lockheed Martin and Raytheon Technologies, the Javelin anti-tank missile has become the de facto symbol of resistance in the battlefields of Ukraine. Fired from the shoulder, the Javelin is terrifying because death can literally arrive from anywhere.
The effectiveness of this weapons system comes down to its trajectory. Though fired from the ground, the Javelin quickly finds its way skyward before screaming down onto its target. Tanks typically have their hardest protective compounds to the side, while the top is relatively vulnerable.
It’s no wonder why some Russians abandoned their tanks and other vehicles: Getting hit by a Javelin is a horrible way to die.
A U.S. Special Operations official reported that out of 300 missiles, “he had seen estimates of 280 Russian armored vehicles taken out by the Javelin.” While it’s hard to know how precise those numbers are the undeniable effectiveness of the weapon will likely warrant massive demand everywhere.
Raytheon Technologies (RTX)
Though Raytheon Technologies deserves just as much credit as Lockheed Martin for the Javelin anti-tank missile, I’m going to share the love individually for RTX by mentioning the Stinger anti-aircraft weapons system. Just like its arguably more popular cousin, the Stinger is shoulder-fired.
Unfortunately, the fog of war prevents independent analysts from verifying the statistical effectiveness of the Stinger. Nevertheless, Newsweek reported that per the Ukrainian Ministry of Foreign Affairs, Russia had lost 77 aircraft since its invasion as of March 14.
In addition, the ministry stated that Russia also suffered the loss of 90 helicopters since the start of hostilities. Again, these numbers cannot be independently verified. Still, videos from the fighting demonstrate how deathly frightening being a Russian helicopter pilot must be during this war.
As with Lockheed, Raytheon is one of the defense stocks to buy since its brand is basically enjoying real-time proof of effectiveness of its products.
Defense Stocks to Buy: AeroVironment (AVAV)
Throughout the conflict, Ukrainian officials from President Volodymyr Zelenskyy on downward have begged for the U.S. and NATO forces to impose a no-fly zone over Ukraine. However, western leaders have been reluctant to even consider this option as it would square up the U.S. and Europe against Russia. Understandably, Europeans are especially concerned because that might bring war to their front door.
Still, all hope for the Ukrainian resistance is not lost. Drones have proven especially deadly to Russian invaders, and that brings AeroVironment into the picture. Specializing in the Switchblade drone, they distinguish themselves from other unmanned aircraft in that the drones themselves are the weapons; hence the term kamikaze drones.
But the pivotal reason why they are effective is that they’re small and easily deployed, with soldiers able to hit targets outside the line of sight. Should Russian forces advance into more urban areas of Ukraine, the Switchblade could unleash excruciating devastation.
Thus, AVAV is looking great among defense stocks as the Switchblade could be yet another symbol of the defense of global democracy.
Olin (OLN)
Typically, I mention Olin under the context of publicly traded firearms businesses. However, it has easily become one of the most significant defense stocks to buy because of the crisis in Ukraine. True, Olin doesn’t generate the coverage of Lockheed or Raytheon. However, if there is a true fundamental symbol of resistance, it could be Olin.
Why? Back in October 2020, the company made news when it “assumed full management and operational control of the Lake City Army Ammunition Plant in Independence, Missouri.” Essentially, the move makes Olin the U.S. Army’s largest supplier of small-caliber ammunition. Given its relevance to the military industrial complex, Olin may play a significant role in the fight for Ukrainian independence.
As events unfold in Ukraine, we’ve seen everyday people picking up guns and ammo and defending their homeland. Under a context where firearms in the U.S. have come under heavy political pressure, it’s a positive for Olin and defense stocks in general to tie in with an alternate storyline.
Defense Stocks to Buy: Booz Allen Hamilton (BAH)
While the actual fighting and bloodshed may be thousands of miles away from the U.S., the double-edged sword of connected technologies means that serious conflict is only a mouse click away. Because of the severe sanctions that western allies imposed on Russia, concerns erupted that the Kremlin could retaliate with cyberattacks. Cynically, this threat profile boosts the relevance of Booz Allen Hamilton.
Specializing in cyber defense among other services, Booz stands prepared to defend U.S. agencies and critical infrastructure from nefarious online activities. To be fair, it’s not a given that the Russians will launch cyberattacks against western forces.
Further, the social and economic devastation that could stem from cyberattacks means that companies like Booz Allen Hamilton are on the front lines. Therefore, I like BAH and other defense stocks related to cybersecurity.
DuPont (DD)
Known worldwide as a chemicals and applied sciences specialist, I wouldn’t normally plug DuPont as one of the defense stocks to buy. However, under the Biden administration’s aid package, it will send defensive assets to Ukraine such as body armor. As it turns out, DuPont originated the Kevlar material that forms the backbone of such armor.
Here’s an important history lesson: Stephanie Kwolek invented Kevlar and per the non-for-profit organization Kevlar Survivors’ Club, the underlying material has documented 3,200 lives saved.
Kwolek’s work is playing a critical role on in the battlegrounds of Ukraine as resistance forces desperately struggle against a numerically superior enemy. While most defense stocks that will see upside from this conflict are related to offensive weapons, DD provides an excellent alternative to those that may be squeamish about the military industrial complex.
Defense Stocks to Buy: General Dynamics (GD)
Arguably best known for developing the F-16 Fighting Falcon, General Dynamics is a rather versatile name among defense stocks. The company is also in the business of producing mortars. Per its website, “General Dynamics Ordnance and Tactical Systems produces mortar bodies for the full range of the U.S. Army’s 120mm mortar munitions inventory. Mortar production includes the M934 High Explosive (HE), the M929 Smoke, the XM930 Illumination and the M931 Full Range Training Round (FRTR).”
Why is this important? According to the latest security assistance plan for Ukraine, the U.S. will send “Over 20 million rounds of small arms ammunition and grenade launcher and mortar rounds.” To be frank, I’m not a mortar expert — I usually write about cryptocurrencies — so I’m not entirely sure if General Dynamics will be involved with this assistance package.
However, so long as the fighting continues, the need for deadly projectiles will rise, especially as urban fighting will likely bunch up “soft” vehicles and personnel. Mortars could be wildly effective under such scenarios, thus drawing speculative attention toward GD stock.
This article originally appeared at InvestorPlace.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
