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Investing in Space Stocks: The Final Money-Making Frontier

space stocks

The commercialization of space is estimated to be worth more than $300 billion a year.

Over the past two decades, the role of private industry has grown as that of the government has shrunk, opening up new investing opportunities in the "final frontier."

Here’s what’s behind the rise of private space, and two space stocks to buy to tap into this futuristic cash cow…

The Boeing Co. (NYSE: BA) Wins Controversial $35 Billion Contract for Refueling Tanker

In a deal expected to spark an economic boon of more than 50,000 jobs, The Boeing Co. (NYSE: BA) last week was awarded a $35 billion contract to build a fleet of U.S. Air Force aerial refueling tankers.

After 10 years of controversy and haggling in Washington, Boeing was declared the "clear winner" over European Aeronautic Defense & Space Co. (EADS), the company that builds Airbus planes.

"We're honored to be given the opportunity to build the Air Force's next tanker and provide a vital capability to the men and women of our armed forces," Boeing CEO Jim McNerney said in a statement.

Deputy Defense Secretary William Lynn told Politico that Boeing won the contract on the strength of its bid price, how well each of the planes would meet military needs and the cost to operate them.

"This is one of the happiest days of my professional life," said Rep. Norm Dicks, D-WA, the ranking Democrat on the House Appropriations Committee. He added that a change he suggested to the method the Air Force used to evaluate the bids might have made the difference.

The Pentagon considered the cost to operate the planes over 40 years rather than 25 years, he said, and since Boeing's NewGen Tanker will burn 24% less fuel than the EADS A330 plane, Boeing had a big edge.

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Defense Suppliers Compete for a Piece of India’s Multibillion-Dollar Military Revamp

The Boeing Co. (NYSE: BA) is in talks with India for a $5.8 billion military aircraft deal as the country triples its defense budget, leading defense suppliers to compete for a piece of the multibillion-dollar action.

India is negotiating with Boeing over the purchase of 10 C-17 Globemaster III aircraft, which would be the largest defense order from India for Boeing, the second-largest U.S. defense contractor. India's Finance Minister Pranab Mukherjee said in February the government would spend $33 billion on defense in the fiscal year starting April 1.

The Asian country's "defense procurement budget is quite huge," Laxman Kumar Behera, a research fellow at the Institute for Defense Studies and Analyses in New Delhi, told Bloomberg. "The U.S. arms industry has become quite interested in the Indian defense market."

Boeing expects to bid for as much as $31 billion of military contracts in the next 10 years as India looks to replace aging Russian-made equipment.

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Déjà vu All Over Again: Boeing Delays Dreamliner for Sixth Time

In what seems like a never ending saga, The Boeing Co. (NYSE: BA) postponed delivery of its 787 Dreamliner for the sixth time, promising now to finally hand over the first plane to customers in the middle of the first quarter of 2011.

The latest delay came after Rolls-Royce Group PLC told the world's largest aircraft maker it would be unable to supply an engine needed to complete flight testing, Boeing said in a statement Friday. Rolls said the delay wasn't related to a 787 engine blowout on a test bed in Derby, England, which this month forced it to shut the site for repairs.

The composite-plastic plane is already more than 2 1/2 years late following delays caused by working with new materials, parts delays from suppliers and redesign work involving an Italian sub-contractor.

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Farnborough Air Show Highlights Robust Recovery in Aviation Industry

The Boeing Co. (NYSE: BA) and its European rival Airbus SAS, got off to a confident start at the Farnborough Air Show yesterday (Monday), receiving billions in orders that highlight a commercial aviation industry on the rebound.

The aerospace industry's biggest annual air show is being held this week outside of London, where it holds court every other year, alternating hosting duties with Paris. The show is expected to be a profitable one for Boeing and Airbus as leasing companies and airlines place orders to expand and upgrade their fleet.

The industry giants were upbeat entering the show, expecting orders to showcase a healthy post-crisis aircraft market.

"You'll be surprised by some of the announcements we'll make," Airbus Chief Operating Officer John Leahy said at a press conference in London on July 17. "The world economy is turning around. I would have told you maybe four, five months ago that maybe we wouldn't have announced many orders, if any, at the air show. Now we're going to announce quite a number."

Since the show kicked off, Emirates Airline of Dubai - the largest major airline in the Middle East - ordered 30 of Boeing's 777 jets in a deal worth nearly $7 billion.

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EADS Gets a Shot at Boeing's Market Share After Europe Accuses United States of Protectionism

Airbus SAS parent the European Aeronautic Defense and Space Company (EADS) said yesterday (Tuesday) that it intends to compete against The Boeing Co. (NYSE: BA) for a $35 billion U.S. military refueling tanker contract, continuing a ten-year battle recently plagued by protectionism claims.

This is the third act in a drama that Boeing Commercial Airplane CEO Jim Albaugh refers to as "the longest-running soap opera since 'Days of Our Lives.'"

EADS dropped out of the bidding six weeks ago when its partner in the deal, Northrop Grumman Corp. (NYSE: NOC), claimed the Pentagon's contract proposal had been drawn up to favor Boeing. But the Pentagon agreed to extend the bidding deadline from May 10 to July 9 after European officials claimed the situation reeked of trade protectionism.

EADS tried to find another U.S. company to pair with, but instead was forced to enter a solo bid with the help of American subcontractors. EADS said it felt compelled not to give up because its A330-based tanker is a better fit for the job than Boeing's 767-based tanker.

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Buy, Sell or Hold: The Boeing Co. Is Flying High and Ready to Soar Even Higher

Last Dec.14 I gave you my global outlook for 2010.  I recommended three key stocks that would be flying this year:  The Boeing Co. (NYSE: BA), Corning Inc. (NYSE: GLW), and Cypress Semiconductor Corp. (NYSE: CY).

So far, they have all enjoyed rallies.

Boeing rose 29% in about three months, Corning has appreciated about 7%, and Cypress Semiconductors is up 11%.  So all three beat the Standard & Poor's 500 Index, which is up 6% over the same time period.

I remain very bullish on all three companies, but today we will focus exclusively on Boeing.

Boeing continues to ride very powerful trends, and the company is executing well. 

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Pacifying the Panda: U.S. Companies Must Take a New Approach to China

There's no question about what kind of profit opportunities the Chinese market offers. Moreover, the willingness of U.S. companies to partner with China in the pursuit of profit is equally blatant.

So why is it that more U.S. businesses feel less welcome in China now than they did four years ago?

The fact is that in the past four years, China's economy has continued to grow by leaps and bounds, while a humiliating financial collapse and soaring debt have tarnished much of the shine that once adorned the U.S. market.

Indeed, for the first time in perhaps more than a century China has the upper hand. How long that will last is a difficult question to answer, but right now, China wants to use its leverage to support domestic companies - and it's doing so unapologetically.

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Why the Bulls Can Stand Strong at Home and Overseas

Stocks enjoyed another plus week, closing one of the better Marches of the past 80 years. It seems like ages since volatility has been this low, and there have been many complaints about complacency and listlessness. Yet those concerns may be misplaced if indeed we are enjoying the second leg of a normal bull cycle. Low volatility in a bearish phase does suggest complacency, to be sure, but in a bullish phase it serves more to keep expectations in check. 

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Healthcare Reform Losers: Companies Providing Retiree Benefits Face Multi-Million Dollar Tax Costs

After sending letters of protest to Congress in the months prior to the healthcare law's approval, U.S. companies are now facing multi-million dollar after-tax hits this year due to a tax provision in the new legislation, labeling them healthcare reform losers instead of winners.

Part of the new healthcare law places a federal income tax on government subsidies given to companies that provide retirees and their spouses with drug benefit plans. The 28% subsidy was created as Medicare Part D, adding a prescription plan for senior citizens to the Medicare Act of 2003. To encourage companies to continue offering retirees a drug plan, the tax-free subsidy reduced companies' costs. Fewer senior citizens then went through Medicare's prescription program - which would have cost taxpayers much more than the subsidy price.

Caterpillar Inc (NYSE: CAT) and Deere & Company (NSYE: DE) are just two of the businesses that fought the new stipulations. The manufacturers estimate the tax will cost them $100 million and $150 million this year, respectively. Other companies who will pay handsomely include AK Steel Corp. (NYSE: AKS) with $31 million in charges, and Honeywell International Inc. (NYSE: HON) with an estimated fee of $42 million.

Consulting firm Towers Watson & Co. (NYSE: TW) estimates these taxes could cost companies about $233 per person receiving drug benefits - a hefty price tag when a company gives benefits to 40,000 retirees, like Caterpillar.

Overall, more than 3,500 companies offer drug benefits to 6.3 million retirees. Although the tax won't be effective until 2011, accounting practices force companies to recognize the fees in the period in which the law is signed. That means the tax could nab $14 billion from corporate profits in a year when companies were hoping to recover from huge losses during the recession.

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Will Taiwan Arms Sale Ground Boeing?

Roughly $400 billion in revenue would be a heavy price to pay for selling 12 missiles to Taiwan, but that potentially is what The Boeing Co. (NYSE: BA) is facing as China continues to fume over U.S. arms sales to the renegade island. The Obama administration last week approved a $6.4 billion weapons deal with Taiwan. The deal, which was brokered by the administration of George W. Bush in 2001, included UH-60 Black Hawk military helicopters and additional Patriot PAC-3 missile defenses, but not additional F-16 jets, which the government deemed "too provocative." The sale infuriated China, which considers Taiwan its territory. Beijing has vowed to unify the region peacefully if possible and forcefully if necessary, but the 1979 Taiwan Relations Act obligates the United States to "provide Taiwan with arms of a defensive character." That makes Taiwan the most sensitive issue in bilateral relations between the two nations.

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Buy, Sell or Hold: Ford Motor Co.'s (NYSE: F) Turnaround Could Put Investors on the Fast Track to Profit

Back on July 28, 2008, I recommended buying a speculative stake in Ford Motor Co. (NYSE: F). The stock has more than doubled in value since then, and I believe it's positioned for even more gains.

Let me tell you why.

Investing in a company as it turns around from a highly distressed situation is one of the most profitable investments one can make.

Many billionaires, like Wilbur Ross and David Tepper of Appaloosa Management LP, are masters of this style of investing. And they have the profits to prove it.

That's why I am always looking for these rare situations, which can play a very important role in a portfolio, even with a small initial investment. And right now there are a few very strong signals that the U.S. auto sector, which was demolished by the financial crisis, is going to bounce back stronger than ever.

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Investment News Briefs

With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.

House Rethinks Glass-Steagall; Boeing's Dreamliner Finally Lifts Off; Manufacturing, Wholesale Prices Both Rise; Best Buy Beats Street; GE Sees Flat Revenue; Wells Fargo to Pay Back TARP

  • The Glass-Steagall Act, which barred banks that took deposits from underwriting securities, is under consideration for reinstatement by the U.S. House of Representatives, according to Majority Leader Steny Hoyer, D-MD. A renewal of the 1933 law “is certainly under discussion” by House members, Hoyer told Bloomberg News in Washington. The Glass-Steagall law was repealed in 1999 to help pave the way for the formation of Citigroup Inc. (NYSE: C) with the $46 billion merger of Citicorp and Travelers Group Inc. Enactment of the law has generated debate about whether it helped spawn reckless lending practices and financial speculation that led to the meltdown of credit markets last year and the $700 billion U.S. bailout of troubled banks, including Citigroup. “As someone who voted to repeal Glass-Steagall, maybe that was a mistake,” Hoyer said.

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Buy, Sell or Hold: Government's HeavyHanded Plans Spawn Profits With These Three Top Stocks for 2010

When government boosts its involvement in the economy, there's a predictable impact on interest rates, taxes, inflation, the country's currency and even its stock market. As a veteran global investor, I've seen this play out time and again in emerging-market economies, where it's commonplace for government to play an active and heavy-handed role.

I know from my years of experience just what to expect each and every time this story plays out. And that's not all.

I also know how to turn this special knowledge into beat-the-market profits.

Here in the United States, the Obama administration and the U.S. Federal Reserve are like two elephants that have been put to work brutishly reshaping the U.S. economy. We're already experiencing the effects of big government involving itself in the private sector. Expect the dollar to fall even more - after year-end profit-taking ends. Also expect a further deployment of government-stimulus money to industries where the United States has a large competitive advantage and can generate domestic jobs.

We'll be only too happy to ride the resulting economic shifts for profit.

In fact, as part of this installment of "Buy, Sell or Hold" - I've identified three of the best profit opportunities for the New Year. The three "must-own" companies - each poised to benefit from these shifts - are: Corning Inc. (NYSE: GLW), The Boeing Co. (NYSE: BA) and Cypress Semiconductor Corp. (NYSE: CY). We offer them to you here as part of a Money Morning "Outlook 2010" Special Report.

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