Harris Stock: Investors Made 168%…With a Lot More Upside Ahead

Harris Stock
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Harris Stock Riding High on Innovative Products

Today’s stock involves one of my popular investing strategies that could double the returns for investors. The strategy of investing in “picks-and-shovels” stocks is about investing in companies that supply products or services to a particular growing sector or trend. Investors thus benefit from participating in the rising trend and get a chance to make handsome gains in the process.

A case in point is Harris Corporation (NYSE:HRS), which provides integrated system solutions for U.S. and international defense. It also provides solutions for public safety networks that include ground and airborne radios and night-vision technology, besides battlefield management software.

The company helps its customers in more than 100 countries in solving their mission-critical challenges, and, although there are lot of innovative products that the company is known for, it is the potential in defense that is the most exciting. This is also the reason HRS stock has been going up for the past few months.

Harris is a leading global supplier of secure radio communications and other solutions for a diverse portfolio of U.S. military and allied international forces. The company’s product capabilities include secure transmission of voice, high-speed data, and full-motion video. It supports virtually all military domains.

In a nutshell, the company’s products build a highly mobile, secure, reliable, networked battlefield environment that connects land, air, and sea. It is not difficult to see that these products are likely to continue to be in good demand. This has also resulted in the continuous rise of Harris stock over the past year.   

The global aerospace and defense industry outlook for the year 2017, provided by Deloitte, points towards stronger growth, with the sector revenues likely to grow about two percent in the year. The report further says that rising global tensions have led to increasing demand for defense and military products across the globe. This is leading to increased defense spending globally. (Source: “2017 Global aerospace and defense industry outlook,” Deloitte, last accessed July 28, 2017)

The company is well positioned to gain from this trend as the demand for its secure network solutions grows. In February, Harris Corporation was awarded a five-year $403.0-million contract to continue communications support to the U.S. army. And early this month, it won a $461.0-million contract to upgrade existing land mobile radio system infrastructure.

 

Harris Corporation invests heavily in research and development to maintain its competitive edge. Not only this, it actively looks for inorganic growth. Last year, the company acquired Exelis, thus adding scale and a diverse portfolio of advanced technologies and expanding market opportunities. Exelis has technical expertise in global aerospace, defense, and information sectors, which bodes well for HRS stock.

On the earnings front, Harris reported adjusted earnings per share of $1.38 in its third quarter (an increase of two percent). But it posted a decline in revenue as its ongoing strategy takes some more time to bear fruit.

 

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Harris stock has gained almost 32% over the last year, and about 168% over the past five years. The following stock chart shows this astounding rise.

HRS stock chart

Chart courtesy of StockCharts.com

As the defense expenditure continues to go up, HRS stock is likely to gain further from this uptrend and may reward its investors with triple-digit returns.

The Bottom Line on Harris Stock

Given the importance of safe and secure communications for defense forces in current times, it becomes clear that the products and services provided by Harris will continue to be in strong demand in the coming years.

As defense expenditures are unlikely to come down anytime in future, Harris is one picks-and-shovels stock that could be considered by investors for high gains.