Lockheed Martin Stock Is a Hedge to Beat Uncertainty
The world got quite a shock Wednesday morning with the victory of Donald Trump as president of the United States. Some of you got an even bigger shock when you checked the value of your stocks. Some of them were quite a bit down. But not Lockheed Martin Corporation (NYSE:LMT). Politics aside, Lockheed Martin stock could do well under a Trump presidency.
Lockheed Martin stock surged over six percent in the wake of Trump’s win. It can’t be a coincidence. LMT investors have sent a strong signal that a Trump White House would be good for defense spending. After one of the most divisive elections in U.S. history, Trump will surely boost the patriotic economy. What’s more patriotic than a Lockheed Martin “F-22” jet?
Many investors might be in the dark as to the future direction of the economy under Trump. But if he wants to have a shot at a second term, he must boost the economy. It won’t suffice to support Silicon Valley’s usual suspects, which employ too few workers. Trump must boost industry and manufacturing. The defense sector is a strong candidate to contribute big numbers, and LMT stock is poised to be one of its main beneficiaries.
Apart from a nationalist impulse, LMT stock could make a nice hedge against uncertainty. For the investor, the Trump election means uncertainty, and stock markets are notoriously allergic to this condition. While the polls’ failure to predict the Trump avalanche suggests caution in forecasts, it is reasonable to expect greater volatility in the coming months.
Lockheed Martin Could Pass a “Buffett Test”
Another thing is certain; the U.S. is an exceptional economic and capitalist machine. It will always swing in favor of growth. During the 20th century, the United States endured two World Wars and other traumatic and expensive military conflicts. Apart from depressions, recessions, and total financial meltdowns, the Dow Jones index has continued to rise, fall, and bounce back. LMT stock represents that kind of endurance.
So, investors should ignore the political headlines from the mainstream media and concentrate on what they can control. This is time for Warren Buffett-style investing. This means focusing on outstanding companies that can withstand shocks. As one of the biggest defense sector component of the Dow Jones, Lockheed Martin would pass the Buffett test.
If you doubt Trump, consider that LMT stock would have done well even if Hillary Clinton had won. The difference with Trump is that the tycoon president-elect likes big hardware. He wants to boost the U.S. armed forces’ hardware, rather than simply make it more efficient. That means more planes, tanks, ships, aircraft carriers, helicopters, satellites, and then some.
Moreover, Trump has both houses of Congress on his side. He can get the purchase orders (POs) through! Many of those POs could be heading straight to Lockheed Martin headquarters, boosting LMT stock, which could surpass the analysts’ target of $275.00 in 2017.