Cheap Defense Stocks in 2017
In 2016 there were many cheap defense stocks to choose from. Defense stocks were one of the most sought after sectors last year but in 2017 the interest in defense stocks may be taking a step back. One of the main reasons for this is because defense stocks are not cheap anymore, not even a little bit. The demand for defense stocks has risen since November and the prices have followed.
In December of last year after the new presidential election results were in the new President-elect began tweeting. With 140 characters he erased billions of dollars when he wrote “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!” With that one tweet, Boeing stock dropped 1.6 percent for a loss of over 1.4 billion dollars. While the drop didn’t last long because of a huge contract that Boeing was under it wouldn’t be the first defense stock to take a hit because of Twitter.
The next of the cheap defense stocks to be affected was Lockhead Martin. Lockheed Martin stock plummeted over 5 percent after the tweet: “The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after Jan. 20th.” With a push of a button the stock lost over 4 billion dollars in market value. Northrop Grumman Corporation, the company that makes the F-35’s center fuselages also lost over 5 percent or over 3 billion dollars from that one tweet.
While Boeing had some stock dips recently, February has been a good month for them. They recently unveiled their new 787–10 Dreamliner, the latest super-efficient plane to add to their 787 family. They are also expecting a visit from President Donald Trump at Boeing’s South Carolina plant which is speculated to include an announcement on the Export-Import Bank. These announcements had Boeing closing at 170.81 on the market last week, up 0.9 percent.
When searching for cheap defense stocks it is smart to look at the prices they pay for new subsidiaries and the prices that are paid to them when they cast off the divisions they don’t want anymore. Defense stocks are usually considered cheap when they are selling for a price-to sales ratio of 1 or lower. They are considered expensive when they rise over that.