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The Pentagon and the U.S. defense industry recently scored a massive victory - with bipartisan support, no less, practically impossible these days - that has largely flown under the radar. Their budget measure made it through Congress in the middle of last month with very little attention, no doubt due to a heavier media focus on inflation and omicron.
There are a lot of good reasons to keep money flowing toward the military right now. China increasing military pressure on Taiwan, tension over shipping in the South China Sea, a cooperative defense agreement between Russia and China, Russia's belligerence in eastern Ukraine - all these things point to an increased need for U.S.-led defense coalitions in that region.
One area of special interest is in tech R&D. With South Korea announcing that it now has hypersonic missile technology, and the world's most important microchip foundries in Taiwan at risk from China's aggressive posture, it's more important than ever to make sure America can keep pace.
I've identified a contractor that's positioned to benefit from the 5% Pentagon budget increase that goes along with this new bill, and to me, it's a must-own stock. The firm more than doubled the market's returns last year and has more upside ahead...
Civilian Manufacturing and Modern Defense
That firm is Textron Inc. (NYSE: TXT). It is a conglomerate with a history that dates back to 1923, and its pedigree in tech R&D is almost unparalleled.
This company builds everything from aircraft (think Hawker, Beechcraft, and Cessna) to golf carts (E-Z-Go). Jacobsen, Arctic Cat, Cushman, and Kautex are just some of the brands in its collection.
But a lion's share of its revenue comes from its defense operations. It's a key niche player in a variety of sectors, including cutting-edge fixed-wing and rotor aircraft to autonomous vehicles and ground-based strategic deterrents.
Consider that its T-6 trainer and its brawnier AT-6 light attack planes have been used to train Allied air forces around the world. The AT-6 is especially valuable in drug interdiction and in difficult remote terrain where it can operate better than larger attack planes.
Then there's the Scorpion, a jet that provides both ISR (intelligence, surveillance, reconnaissance) and strike capabilities.
Textron also owns Bell Helicopter, and therefore, some of the most storied rotor-powered vehicles ever built. The Bell Huey Cobra was a legend for much of the latter 20th century. And the V-22 Osprey is a military VTOL that combines the flexibility of a helicopter and the speed of a turboprop plane.
Its Howe & Howe brand makes cutting-edge robotic land vehicles for extreme conditions. Its Lycoming Engines division powers over half the world's general aviation fleet.
This combination of solid civilian and defense portfolios is a great twofer for investors looking to capitalize on both the economic rebound and a restructuring defense sector.
And Textron's stock's performance certainly reinforces that view. Last year, it gained some 57%, more than double the S&P 500's 26% gain. Right now, the stock is up 63% in the past 12 months, yet it's trading far below the average PE for the S&P 500.
Let me be candid, though: Over the past three years, earnings growth was weak. Some of that was pandemic related, some election-related, some sector related.
But that changed in the most recent quarter when Textron posted 60% earnings growth. That was what Wall Street analysts expected for the full year.
And there's still plenty of upside ahead.
Just to be conservative, let's cut earnings expectations in half. That's still an earnings double in as little as 2.5 years.
So, a company like Textron isn't just defending America. It's safeguarding your portfolio as well.
As impressive as the profit potential is in this stock, there's another tech niche that's brand-new and is ideally poised for explosive growth.
I'm talking about quantum computing - an entirely new way to process data. Traditional computers deal in bits, either one or zero. But quantum computers process qubits, which can be both simultaneously.
The practical upshot of this development is that quantum computers can crunch data as much as 158 million times faster than classic machines. Now, this will likely make your computer obsolete - it will probably disrupt every industry on Earth, in fact - but the really good news is I'm projecting this computing revolution will generate $8 trillion in new wealth over 2022 and beyond. Investors who move now, though, can grab a "ground-floor" stake in this game-changing tech - here's how...
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.