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You'll have to forgive Mike Petters if he seems a little tongue-tied these days.
Ever since the Budget Control Act of 2011, things have been slow in the military shipbuilding industry.
That law is what led to "sequestration," the across-the-board spending cuts of $1.2 trillion over 10 years, roughly half of that from defense.
So things have been a bit depressing in Norfolk, Va., and other shipbuilding centers.
But no longer.
Yes, the markets are under pressure, but let's tune out this kind of short-term noise and look for great long-term moneymaking opportunities. In fact, sell-offs like we saw last week give us a new buying opportunity.
While the talking heads on CNBC were going crazy over the Trump administration's decision to slap tariffs on imported steel and aluminum, there's some great news coming out of the White House that everyone seems to be ignoring.
Here's the thing: Coming on the heels of a brief government shutdown, the recent budget deal will hand defense contractors an extra $75 billion over the next two years. The Pentagon intends to boost spending maintaining older equipment – and on new aircraft, missiles, tanks, and, yes, ships.
This major U.S. defense buildup caught many industry veterans by surprise.
"I had to actually go practice how to say the word 'growth' a few times before this call," Petters, the CEO of a major shipbuilder, told his company's analysts during a recent conference call. "We haven't had a chance to talk about growth in shipbuilding for a long time."
Petters' company may be the biggest beneficiary of this new defense buildup – but it's far from the only one.
That's why, today, I want to tell you more about this company – and three others that will be making big bank on the strength of all those tens of billions heading the Pentagon's way.
Let's take a look…
Become a Trump Budget Beneficiary
Before we go into more details about these potential big winners, I want to take a moment to return back to a chat we had on Jan. 3.
At the time, I said 2018 was stacking up to be the best year for defense firms and their investors since the Ronald Reagan-era buildup that began in early 1981.
I still believe that. In fact, the budget deal just confirms my conviction.
As a group, defense stocks rallied 27% last year – and overall have outperformed the market so far this year.
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But "crush" is what they're going to do the rest of this year… and beyond.
With that in mind, I've identified four firms that I believe will strongly benefit from the extra $75 billion.
Their shareholders will benefit, too.
Let's start with that shipbuilder…
Defense Budget Winner No. 1: The Shipbuilder
On Feb. 16, Huntington Ingalls Industries Inc. (NYSE: HII) snagged a massive $1.43 billion contract to design and build the LPD 29, a San Antonio-class amphibious transport dock.
These 684-foot-long ships are a major part of the U.S. Navy's 21st century amphibious assault force. With them, Marines, their equipment, and supplies can get close to land – and then disembark and come ashore via hovercrafts or conventional landing craft. Plus, they can be used in a wide range of combat theaters.
The contract award is a clear reflection of Huntington Ingalls' sterling industry reputation. The firm is known throughout the military as a supplier that can deliver massive new builds, on time and on budget.
Huntington Ingalls heads into the new defense spending upgrade cycle with ample momentum. Its fourth-quarter earnings of $3.11 a share were around $0.20 ahead of forecasts. And $8.1 billion in new contract awards in 2017 – before this newest award was announced – should keep its shipyards humming at a busy pace.
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About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.