Defense Investing

Article Index

This 100-Year Old Military Technology Makes Raytheon (NYSE: RTN) Stock Today's Best Defense Buy

By , Associate Editor, Money Morning • @JimBach22 -

RTN stock

War-weary investors may shudder at the thought of buying Raytheon Co. (NYSE: RTN) stock, but the practical investor will see a great opportunity.

The growing threat of militant groups, accentuated by the Islamic State of Iraq and al-Sham (ISIS), currently infecting large swaths of land across Syria and Iraq prove that the defense sector is not only a good investment but a necessary one.

Here's why RTN plays an important role in this fight...

Give Me the Right Stamp of Approval and I’ll Give You Your Next 319% Profit

By , Defense + Tech Specialist, Money Morning • @Robinson_STI -

At one time or another, I'm sure that we've all been outraged by stories of rampant government waste - especially in areas of aerospace- and defense-related research.

But today I'm going to tell you about a NASA-related tech program that led to a big payoff. In fact, investors who knew what to look for could've turned $10,000 into $41,900 - a 319% return - in just 29 months.

I'm relating this story for a couple of reasons. It shows you why I spend so much time looking at the research that's underway in labs at both the university and national level.

And it also explains why I write to you so frequently about cutting-edge science where I believe there's a big potential payoff.

My ultimate goal, you see, is to tell you about profit opportunities like this one before they occur.

To continue reading, please click here...

Defensive Investing: Covered Calls Increase Cash Flow, Up Protection

By , Contributing Writer, Money Morning -

Once you get beyond buying puts or calls for purely speculative purposes, no other options strategy is more popular than selling covered calls - and with good reason: Few investment techniques offer more potential benefits with such a low level of risk.

Considered the most conservative of all option plays, this strategy - which basically involves selling (or "writing") one call option for each 100 shares of a stock you own - can be employed for one or more of five distinct purposes:

  1. To generate a stream of additional income - over and above dividend payments - from individual stocks in your equity portfolio.
  2. To generate a stream of income from stocks you own that pay no dividends.
  3. To reduce the effective cost basis of longer-term stock holdings by bringing in option premiums, thus recovering some of the original purchase price.
  4. To provide a limited hedge against potential losses in portfolio value as a result of overall market pullbacks or cyclical downturns in the prices of specific stocks.
  5. As an income-producing substitute for a "limit-sell order" - intended to liquidate a stock position when a specific profit target is achieved.

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Question of the Week: Investors Preparing for Double-Dip Recession

By , Associate Editor, Money Morning -

The "pause" button has been hit on the U.S. economic recovery, fueling worries that we're headed for a double-dip recession.

"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast last Sunday.

Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy into a new recession.

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We Want to Hear From You: Are You Preparing for a Double-Dip Recession?

By , Associate Editor, Money Morning -

The "pause" button has been hit on the U.S. economic recovery, fueling worries that we're headed for a double-dip recession.

"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast Sunday.

Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy toward a new recession.

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Inflation Isn't Dead, Just Sleeping - And TIPS Can Protect You When It Awakens

By , Contributing Writer, Money Morning -


Investors are always on the lookout for hot tips. The best tips highlight investments that pack a big potential profit punch, but that haven't yet started their move.

That's just what we have for you here.

We're not talking about the "inside scoop" on some obscure stock. What we're referring to are government-backed "TIPS" - or, as they're more formally known, Treasury Inflation-Protected Securities.

Admittedly, inflation hasn't been a major concern of late. The U.S. Consumer Price Index (CPI) was actually down by 0.2% in May, extending a 0.1% drop in April, while May's core inflation - which is the CPI measured without the volatile food and energy components - was just 0.1% higher. That's why many market analysts and media pundits are now saying deflation is much more of a worry for U.S. markets than inflation.

However, many of Money Morning's top experts - including Chief Investment Strategist Keith Fitz-Gerald and Contributing Editor Martin Hutchinson - disagree with that assessment. Recognizing the inevitable inflationary impact of increasing deficit spending, growing federal debt, rising state and local taxes and a weakening U.S. dollar, they see renewed upward price pressure not too far down the road.

That makes this the perfect time to learn about TIPS and how they can protect you when inflation again rears its ugly head.

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How to Use Stock Options to Insure Your Holdings Against Short-Term Pullbacks

By , Contributing Writer, Money Morning -

Stock options are among the most versatile tools available to investors. They can be used as a low-cost way to speculate on expected price movements, generate added income on stock holdings, and to lock in gains on profitable positions or hedge against market reversals.

The latter strategy typically involves buying at-the-money put options on your long stock positions. This creates a situation akin to an "insurance policy" in that your profit on the put options will offset most or all of the loss on your stock should prices turn lower during the life of the option.

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Money Morning Mailbag: Taking a Closer Look at Dividend Stocks

By , Associate Editor, Money Morning -

Questions regarding defensive investing in uncertain times continue to fill the Money Morning Mailbag as readers aim to gain more knowledge on protective investment choices like real estate investment trusts, options-straddle strategies and dividend stocks.

In Tuesday's Money Morning article "Defensive Investing: Seven Signs Your Dividend is in Trouble," Contributing Editor Martin Hutchinson detailed how high-yield dividend stocks provide a remedy for market volatility. They generate a yield or capital gains when the market is flat or gently rising, and offer protection against a market decline.

"Dividend-paying stocks provide better long-term returns in all but the most extreme bull markets," Hutchinson said. "Build yourself a diversified portfolio of solid dividend payers and you'll be exceptionally well protected."

Companies consistently paying dividends are less likely to have dramatic share-price declines. Meanwhile, investors who go after short-term gains can be left empty-handed when the stock market reverses.

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Defensive Investing: Seven Signs Your Dividend is in Trouble

By , Money Morning -

Both the U.S. stock market and the U.S. economy are navigating rough waters right now.

U.S. employment, which had appeared to be moving into rapid expansion, suffered a setback in May, with the economy creating only 41,000 jobs. Meanwhile, the stock market - even with the recent rebound that brought it back to the 10,000 level - remains more than 15% below its cyclical high.

That's been the uncomfortable pattern: One economic report points toward a continued U.S. recovery; the next one points toward recession. Sometimes the contradictory research is separated by a single day, other times they are just hours apart. The resultant uncertainty is whipsawing U.S. stock prices - and is leaving investors feeling shaky.

Fortunately, there is a ready remedy, not to mention a place of refuge, from this kind of grinding uncertainty - high-yielding dividend stocks.



To discover the seven signs that a dividend isn't secure, please read on...

Defensive Investing: Defeat Market Volatility With an Options-Straddle Strategy

By , Contributing Writer, Money Morning -

It's often said the stock market can deal with anything but uncertainty, but uncertainty is about all the U.S. stock market has to feed on these days - and that has translated into raging volatility and huge swings in both the major market indexes and the prices of many individual stocks.

Day-to-day swings of 250 or 300 points are becoming almost commonplace - and the direction those swings will take is an ever-growing mystery.

Just look at the Dow Jones Industrial Average as a case in point. Since late February, the Dow has climbed from 10,325.26 to an intraday high of 11,258.01 (on April 26), plummeted to an intraday low of 9,869.62 during the May 6 "flash crash," rallied back to 10,896.91 on May 12, dived to just 9,774.48 during the day on May 25, closed below 10,000 for several days in early June, and vaulted back up above 10,170 at the market's close on Thursday.

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Defensive Investing: The Eight Ways to Tell If You Should Hold - or Fold - Your Mutual Fund

By , Contributing Writer, Money Morning -

With the whipsaw patterns U.S. stocks have experienced in recent weeks - both the Dow Jones Industrial Average and Standard & Poor's 500 Index are down 12% from their highs for the year - even the most ardent buy-and-hold investors are studying their portfolios, searching for holdings to cull.

But what if your buy-and-hold strategy has been implemented using mutual funds? As part of a solid "defensive-investing" review, should you consider bailing out of your current mutual-fund holdings at this point and start looking for better funds to ride into any future recovery?

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Defensive Investing: Four Reasons to Sell a Mutual Fund Laggard

By , Contributing Writer, Money Morning -

When it comes to poor performance in a mutual fund, how long is too long?

Evaluating the performance of a mutual fund is a bit different than evaluating the performance of an individual stock, chiefly because of the time frames involved. Mutual-fund investors should actually evaluate the performances of the funds they hold over a longer time period than they might use to gauge the returns generated by a stock.

Let's face it: Six-month or one-year returns on a mutual fund aren't terribly significant in a long-term portfolio that is based on a well-conceived allocation plan. Short-term weakness could just be a sign that the particular sector in which a fund invests -; or even the fund's particular investing style (growth, value or momentum, for instance) -; is currently out of favor.

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Defensive Investing: Eight Ways to Tell if Your Mutual Fund Still Fits You

By , Contributing Writer, Money Morning -

With the whipsaw patterns U.S. stocks have experienced in recent weeks - both the Dow Jones Industrial Average and Standard & Poor's 500 Index are down 12% from their highs for the year - even the most ardent buy-and-hold investors are studying their portfolios, searching for holdings to cull.

But what if your buy-and-hold strategy has been implemented using mutual funds? As part of a solid "defensive-investing" review, should you consider bailing out of your current mutual-fund holdings at this point and looking for better funds to ride into any future recovery?

You'll only know if you take the time to make the review. And you should take that time.

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Why the Eurozone Debt Contagion is Telling Us That It's Time to Buy Dividend Stocks, REITS and MLPs

By , Contributing Writer, Money Morning -

With the escalating Eurozone-debt-contagion fears of recent weeks, a significant shift is taking place in the global stock-and-bond markets.

The powerful bull cycle that grew out of the early March 2009 market lows - the quickest and strongest stock-market rebound of the past 50 years - has been losing some of its youthful verve as it matures. That means we can expect the pace of gains to moderate as asset classes (stocks, bonds, currencies, commodities) begin to differentiate themselves.

But that doesn't mean the profit opportunities are gone. As that differentiation plays out, such income-oriented plays as high-yielding dividend stocks, real estate investment trusts (REITS) and master-limited partnerships (MLPs) will prove to be major beneficiaries, experiencing a handsome run-up in price. Shrewd investors will move into those investments before their prices increase.



To see what stock-market sectors hold the most promise, please read on...

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

By , Associate Editor, Money Morning -

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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