Here’s How to Play Defense Stocks if Donald Trump Wins

Donald TrumpWhich Defense Stocks Would Benefit from a Donald Trump Presidency?

If elected President of the United States, Donald Trump would invest resources to recruit more soldiers, build more ships, launch more submarines, and have more planes, even if he wants to reduce the United States’ foreign military presence. Trump must have grown up playing with Erector sets and electric trains. He clearly likes the big toys.

It’s no surprise that a Trump White House would be bullish for such companies, as Lockheed Martin Corporation (NYSE:LMT) or Northrop Grumman Corporation (NYSE:NOC) would have much to gain from a Trump presidency. Both companies are in the front line of designing and building the next generations of U.S. Air Force (USAF) fighter jets and strategic bombers.

Boeing Co (NYSE:BA) can also expect some gains, because Trump may encourage additional aerospace contracts. These don’t necessarily involve airplanes. Boeing is a leader in the design and maintenance of some of the deadliest weapons in the U.S. arsenal.

Northrop Grumman and General Dynamics Corporation (NYSE:GD) would also be in the frontline for more ships. It would be reasonable to expect an expansion of the “Zumwalt” class stealth destroyer program. Each ship costs over $5.8 billion.

Advertisement

Donald Trump offered a clear indication of where he would put his money as Commander-in-Chief last April. He wondered why the USAF relied on planes that are now over 50 years old—such as the “B-52″—for important missions. His hint could not have been clearer, especially given the troop numbers he has been crunching.

Trump wants 50,000 additional troops to achieve an active army of some 540,000 soldiers. He wants to move from 23 to 36 Marines battalions and boost the size of the Navy by 25%, meaning more ships and more submarines.

Trump’s Defense Lineup Would Add Billions in Revenue to Contractors

Trump has ambitious targets that would require billions of dollars in new investments and a yuge defense spending limit from Congress. But, if you own NOC, GD, BA, or LMT stocks, under a Trump presidency you will find out what it’s like to feel like Scrooge on Christmas morning, every day.

Americans will be heading to the polls in less than a month. How they vote will determine the United States’ overall political course for at least the next four years. A lot can happen in that time, but the next president will have much to say about how to react to the few probable and many unpredictable (Donald Rumsfeld’s famous “known unknowns”) events that will mark his or her time in the Oval Office.

The two candidates, as they have made abundantly clear, would respond differently to the known threats. But Democratic Party candidate Hillary Clinton and Republican Donald Trump have different views on—and solutions about—defense, how to manage the armed forces, and how to confront the growing threats to cybersecurity, including possible cyberwar.

The two candidates have different approaches and different ideas on just about everything. Hillary Clinton has promoted an image of herself that emphasizes her preparation. She wants to appear capable and dependable. In the September debate, she said that a good commander-in-chief must mix fortitude with the ability to make good decisions. The use of force, she stressed, must always be the tool of last resort, not the first.

Trump vs. Clinton: Who’s Better for Your Defense Portfolio?

Donald Trump, meanwhile, speaks a different language. He underlines his directness. He doesn’t use big words, but suggests that he would be willing to use big guns against threats to the United States.

He also wants to cut excessive taxes on the middle classes. Trump has not explained how he plans to achieve fiscal cuts, while peppering his speeches and entire campaign with slogans and promises that trigger emotions. That’s been his secret to success, because emotions have been running high.

But for those of you voting with your savings in mind—that is, which candidate would be best for your stocks—and you have substantial aerospace and defense holdings, how would Trump or Clinton affect your stock portfolio? Indeed, the two main presidential candidates have significantly different approaches when it comes to the subject of defense and the U.S. armed forces.

Overall, Donald Trump would favor more troop recruitment and more traditional firepower. This should come as no surprise, given his decades spent in the world of heavy-duty equipment—such as cranes and excavators—that is construction.

Hillary Clinton, rather, would favor cybertechnology, and not just because she has known a thing or two about it personally, given the WikiLeaks revelations and her own “mishandling” of thousands of e-mails.

It would be a terrible idea, however, to vote with your portfolio: that is, to put all your guns in one basket. Rather, our goal here is to help you hedge your defense investments to secure a bullish outcome regardless of who moves to 1600 Pennsylvania Avenue next January.