Tag Archives: LMT

Best Heal Care Stocks To Invest In Right Now

Investment company P-Solve Investments Ltd buys Vanguard FTSE Developed Markets, Vanguard FTSE Emerging Markets, Schwab U.S. Broad Market, sells Vanguard Small-Cap Value during the 3-months ended 2017-09-30, according to the most recent filings of the investment company, P-Solve Investments Ltd. As of 2017-09-30, P-Solve Investments Ltd owns 12 stocks with a total value of $2.6 billion. These are the details of the buys and sells.

Added Positions: VEA, VOO, VWO, VTI, SCHB, ACWI, Reduced Positions: VBR, SPY, VNQI, VNQ,

For the details of P-Solve Investments Ltd’s stock buys and sells, go to www.gurufocus.com/StockBuy.php?GuruName=P-Solve+Investments+Ltd

These are the top 5 holdings of P-Solve Investments LtdVanguard S&P 500 (VOO) – 4,400,097 shares, 39.56% of the total portfolio. Shares added by 7.03%Vanguard FTSE Developed Markets (VEA) – 13,317,140 shares, 22.4% of the total portfolio. Shares added by 99.57%iShares Core S&P Small-Cap (IJR) – 6,494,318 shares, 18.51% of the total portfolio. Shares added by 0.65%SPDR S&P 500 (SPY) – 669,450 shares, 6.55% of the total portfolio. Shares reduced by 12%Vanguard Total Stock Market (VTI) – 939,233 shares, 4.73% of the total portfolio. Shares added by 11.34%Added: Vanguard FTSE Developed Markets (VEA)

P-Solve Investments Ltd added to the holdings in Vanguard FTSE Developed Markets by 99.57%. The purchase prices were between $41.01 and $43.57, with an estimated average price of $42.41. The stock is now traded at around $44.77. The impact to the portfolio due to this purchase was 11.18%. The holdings were 13,317,140 shares as of 2017-09-30.

Best Heal Care Stocks To Invest In Right Now: Lockheed Martin Corporation(LMT)

Advisors’ Opinion:

  • [By Rich Smith]

    So long, United Space Alliance (and your one-shot rockets), we hardly knew ye. Today, it’s SpaceX’s reusable Falcon 9 that’s all the rage in space — cheaper than the rockets designed by Lockheed Martin (NYSE:LMT) and Boeing (NYSE:BA) for their United Launch Alliance, flying more missions, and now “flight-proven” to boot.

  • [By Money Morning News Team]

    Lockheed Martin Corp. (NYSE: LMT) is the largest defense company on the planet as measured in market capitalization. It’s our No. 1 pick out of our top picks for several reasons. One is the breadth of its products and reach. It develops and manufactures security, defense, and technology products worldwide.

  • [By A.J. Bursick]

    Rather, investors should buy “good, quality companies – companies where the fundamental business case for owning them is unaffected by what the stock market happens to be doing. Lockheed Martin Corp. (NYSE: LMT), for instance, is one of my very favorites.”

  • [By Benzinga News Desk]

    The Pentagon is poised to review — and probably approve — a new helicopter from Lockheed Martin Corporation (NYSE: LMT) to transport heavy cargo for the Marine Corps in a program valued at as much as $29 billion: Link

Best Heal Care Stocks To Invest In Right Now: Lam Research Corporation(LRCX)

Advisors’ Opinion:

  • [By WWW.THESTREET.COM]

    The same case is made for Action Alerts PLUS holding Alphabet (GOOGL) and for Lam Research (LRCX) and Broadcom (AVGO) and Growth Seeker holding Amazon (AMZN) –and a host of other high-growth companies.

  • [By Ben Levisohn]

    Lam Research (LRCX) soared to the top of the S&P 500 today after beating earnings forecasts and raising its fourth-quarter guidance.

    Getty Images

    Lam Researchgained 6.9% to $136.17 today, while the S&P 500 declined 0.2% to 2,338.17.

    Credit Suisse analysts Farhan Ahmad and John Pitzer and argues that Lam Research’s “new trough is higher than [its] old peak.” They explain:

    We expect that bears will continue to argue that CY17 is a “Peak” year; however we think that investors are missing that it now costs >2x more to get incremental bit growth than three years ago. It is noteworthy that despite ~$17bn of memory WFE in 2016 both NAND and DRAM markets went from oversupply to undersupply – implying that new trough for memory investments is even higher than old peak (2010 memory peak had WFE of $12.6bn). We view Semi Growth, rising capital intensity, and growing China CapEx as secular multiyear themes, which could continue to provide growth in coming years. In addition, in case of tax reform there could be potential to return >$50 per share to shareholders by 2020…Increase TP to $160 (from $143), based on 12x of CY18 EPS plus net cash adj for taxes.

    Lam Research’s market capitalization rose to $22.2 billion today from $20.8 billion yesterday.

  • [By Dan Caplinger]

    Wednesday was a mixed day for the stock market, as the Dow Jones Industrials dropped by triple digits but other major benchmarks fared much better. Crude oil prices fell nearly $2 per barrel to $50.50, and that hurt energy companies, along with a poor earnings report from technology giant IBM. Yet the broader market held up better, and the Nasdaq Composite actually gained ground. In particular, some good news from a few individual companies helped hold the markets up, and CalAmp (NASDAQ:CAMP), Lithia Motors (NYSE:LAD), and Lam Research (NASDAQ:LRCX) were among the best performers on the day. Below, we’ll look more closely at these stocks to tell you why they did so well.

  • [By WWW.MONEYSHOW.COM]

    Lam Research (LRCX) has consistently outgrown the overall semiconductor-equipment market due to its high exposure to 3D NAND flash memory.

    Demand for wafer-fabrication equipment is notoriously volatile. However, over the last 90 days, the consensus profit estimate for this year jumped 17%, with 95% of analysts raising their targets.

Best Heal Care Stocks To Invest In Right Now: Adaptimmune Therapeutics plc(ADAP)

Advisors’ Opinion:

  • [By Jon C. Ogg]

    Adaptimmune Therapeutics PLC (NASDAQ: ADAP) was started with a Market Perform at Wells Fargo.

    Aqua America Inc. (NYSE: WTR) was raised to Overweight from Equal Weight and the price target was raised to $36 from $33 (versus a $31.19 close) at Barclays.

Best Heal Care Stocks To Invest In Right Now: Computer Sciences Corporation(CSC)

Advisors’ Opinion:

  • [By Monica Gerson] Related CSC Earnings Scheduled For May 24, 2016 8 Stocks You Should Be Watching Today Computer Sciences' (CSC) CEO Mike Lawrie on Q4 2016 Results – Earnings Call Transcript (Seeking Alpha)
    Related Earnings Scheduled For May 24, 2016 8 Stocks You Should Be Watching Today Hewlett Packard Enterprise Announces Plans for Tax-Free Spin-Off and Merger of Enterprise … (GuruFocus)

    Some of the stocks that may grab investor focus today are:

  • [By R. Chandrasekaran]

    Some of the outperforming stocks:

    NVDIA Corp (NASDAQ: NVDA) trading up about 5.7 percent with a range between $69.50 and $71.72.
    Amazon.com, Inc. (NASDAQ: AMZN) is gaining about 4 percent. The stock ranged between $770.94 and $787.73.
    Computer Sciences Corporation (NYSE: CSC) is gaining about 3.3 percent with the stock trading between $56.10 and $58.01.
    Microsoft Corporation (NASDAQ: MSFT) is adding about 3 percent with the stock ranging $59.78-$60.52.
    Alphabet Inc (NASDAQ: GOOGL) is gaining about 2.9 percent with the stock trading between $792.90 and $805.
    Intel Corporation (NASDAQ: INTC) is adding approximately 2.9 percent with shares trading in the range of $34.15-$34.60.
    Cisco Systems, Inc. (NASDAQ: CSCO) is gaining about 2.8 percent as the stock traded between $30.61 and $31.05.
    Salesforce.com, inc. (NYSE: CRM) is adding about 2.8 percent with the shares traded in the range of $75.41-$77.00

Best Heal Care Stocks To Invest In Right Now: Syngenta AG(SYT)

Advisors’ Opinion:

  • [By WWW.THESTREET.COM]

    Syngenta AG (SYT) CEO Erik Fyrwald said Wednesday that he was “entirely confident” the company’s $43 billion takeover by China National Chemical Corp. would close in the second quarter of this year and dismissed suggestions it would be disrupted by a third party.

  • [By Shanthi Rexaline]

    Agri-Input Companies — Seeds/ Fertilizers/Pesticides Manufacturers

    Monsanto Company (NYSE: MON): +68.82 percent since 2011. Syngenta AG (ADR) (NYSE: SYT): +56.26 percent since 2011. Mosaic Co (NYSE: MOS): -63.1 percent since 2011. Potash Corporation of Saskatchewan (USA) (NYSE: POT): -67.8 percent since 2011. CF Industries Holdings, Inc. (NYSE: CF): +5.04 percent since 2011. Agrium Inc. (USA) (NYSE: AGU): +1.10 percent since 2011.

    Agri-Finance Companies

Hot Medical Stocks To Buy Right Now

Quick Take

iRhythm Technologies (Pending:IRTC) intends to raise up to $86.25 million in
its IPO.

The company has a differentiated, long-term cardiac monitoring device that transmits data on patient heart activity.

While the company has not disclosed valuation, assuming it is in the neighborhood of $250 million, I would be in favor of the IPO stock.

To listen to this article, click the graphic below:

Company

San Francisco-based iRhythm sells a medical device and related service that collects data on patient heart arrhythmias for clinical treatment purposes.

Hot Medical Stocks To Buy Right Now: Inovio Pharmaceuticals, Inc.(INO)

Advisors’ Opinion:

  • [By Lisa Levin]

    Inovio Pharmaceuticals Inc (NASDAQ: INO) shares were also up, gaining 24 percent to $8.84 following announcement of a clinical study for a HIV vaccine that had nearly 100 percent immune response.

  • [By William Patalon III]

    In a Private Briefing report in late July, we told you that tiny biotech Inovio Pharmaceuticals Inc. (Nasdaq: INO) had dosed its first patient in a Phase I clinical study to evaluate its synthetic vaccine for the Zika virus.

  • [By Keith Speights]

    A quick analysis of Inovio Pharmaceuticals’ (NASDAQ:INO) stock performance history shows plenty of twists and turns — from the company’s early biomedical days to its recent advances in developing a Zika virus vaccine. But this chart shows the story hasn’t been great for investors.

Hot Medical Stocks To Buy Right Now: Logitech International S.A.(LOGI)

Advisors’ Opinion:

  • [By WWW.THESTREET.COM]

    For his “Executive Decision” segment, Cramer once again sat down with Bracken Darrell, president and CEO of Logitech (LOGI) , the computer accessory maker with shares that are up 27% since Cramer last checked in back in November.

  • [By Lisa Levin]

    Mad Catz Interactive, Inc. (USA) (NYSE: MCZ) shares were also up, gaining 35 percent to $0.260 as the company disclosed that it has sold its Saitek simulation product line to Logitech International SA (USA) (NASDAQ: LOGI) for $13 million in cash.

Hot Medical Stocks To Buy Right Now: Lockheed Martin Corporation(LMT)

Advisors’ Opinion:

  • [By Money Morning Staff Reports]

    He recommends Lockheed Martin Corp. (NYSE: LMT), for example. On Tuesday, March 29, missile defense experts at Lockheed were officially tasked with building between 18 and 40 missile rocket interceptors to protect against incoming ballistic missile threats. That contract was worth $273.5 million.

  • [By Jim Cramer]

    LMT’s revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 3.1%. This growth in revenue appears to have trickled down to the company’s bottom line, improving the earnings per share.

     

  • [By Laurie Kulikowski]

    We rate LOCKHEED MARTIN CORP as a Buy with a ratings score of A. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. 

  • [By Money Morning News Team]

    Lockheed Martin Corp. (NYSE: LMT) is the largest defense company on the planet as measured in market capitalization. It’s our No. 1 pick out of our top picks for several reasons. One is the breadth of its products and reach. It develops and manufactures security, defense, and technology products worldwide.

Hot Medical Stocks To Buy Right Now: International Speedway Corporation(ISCA)

Advisors’ Opinion:

  • [By Monica Gerson]

    International Speedway Corp (NASDAQ: ISCA) is projected to report its quarterly earnings at $0.41 per share on revenue of $146.09 million. International Speedway shares declined 1.65 percent to close at $36.26 yesterday.

  • [By Monica Gerson]

    International Speedway Corp (NASDAQ: ISCA) is estimated to report its quarterly earnings at $0.41 per share on revenue of $146.09 million.

    Mitcham Industries, Inc. (NASDAQ: MIND) is projected to post a quarterly loss at $0.36 per share on revenue of $10.99 million.

Hot Medical Stocks To Buy Right Now: Syngenta AG(SYT)

Advisors’ Opinion:

  • [By Shanthi Rexaline]

    Agri-Input Companies — Seeds/ Fertilizers/Pesticides Manufacturers

    Monsanto Company (NYSE: MON): +68.82 percent since 2011. Syngenta AG (ADR) (NYSE: SYT): +56.26 percent since 2011. Mosaic Co (NYSE: MOS): -63.1 percent since 2011. Potash Corporation of Saskatchewan (USA) (NYSE: POT): -67.8 percent since 2011. CF Industries Holdings, Inc. (NYSE: CF): +5.04 percent since 2011. Agrium Inc. (USA) (NYSE: AGU): +1.10 percent since 2011.

    Agri-Finance Companies

  • [By WWW.THESTREET.COM]

    Syngenta AG (SYT) CEO Erik Fyrwald said Wednesday that he was “entirely confident” the company’s $43 billion takeover by China National Chemical Corp. would close in the second quarter of this year and dismissed suggestions it would be disrupted by a third party.

The 5 Best Stocks for Retirees to Buy Before 2018

Adding extra income to your nest egg can be the difference between a comfortable retirement and living the retirement of your dreams. That’s why we’ve put together a list of the five beststocks for retireesto buy today…

Now, owning stocks involves a certain level of risk. That’s especially true for retirees who don’t have decades to recover losses. But if you’re a retiree with some extra money set aside, owning stable, high-dividend-paying stocks can provide extra, valuable income in your golden years.

Money MorningChief Investment Strategist Keith Fitz-Gerald says owning dividend stocks like these can be likeearning a “second salary.”

“Dividends can work like magic when it comes to reaching your financial goals and a safe retirement,” says Fitz-Gerald.

In fact, one of theretirement stockswe’ll show you below yields more than 17% on its dividend. That means a $10,000 investment would accrue $1,700 a year from dividends alone.

And that outpaces other options for retirement income, like annuities or mutual funds…

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An annuity can guarantee a steady rate of return – around 3% for a fixed annuity – but once purchased, you can’t withdraw your money without paying extra. With a stock, you can sell shares when you need to free up the money. Plus, you’ll profit if the share price rises.

Additionally, fees from annuities and mutual funds chip away at your money, countering the added income.

Managed fund fees can run over 2%. Annuities also come with complex fees. Fidelity lists 11 different fee possibilities depending on which annuity you purchase.

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Again, nothing beats a complete retirement plan when it comes to reaching your retirement goals. That’s whyFitz-Gerald has put together an action plan to help you get there, too.

Stocks for retirees moneymorning.com/wp-content/blogs.dir/1/files/2017/12/dividend-jar-75×50.jpg 75w” sizes=”(max-width: 300px) 100vw, 300px” title=”Stocks for retirees ” />But if you’re looking to add a little extra income to your retirement with stable,high-dividend stocks, we’ve got you covered.

Not only do these stocks pay high dividends – some yield above 15% – but these are well-run, profitable companies. That’s essential for income investors, because the company needs to keep generating profits to keep paying a dividend.

Fitz-Gerald says, “a company’s ability to keep paying and increasing its dividend is just as important in the long term” as high yields are.

That’s why we’ve found five stocks with high dividends and excellent business models to keep the payouts coming…

The Best Stocks for Retirees, No. 5: Ticc Capital Corp.

Ticc CapitalCorp. (Nasdaq:TICC)is a corporation chartered under a unique tax structure that allows it to send more of its profits back to investors. Business Development Corps. (BDCs) were designed to allow average investors – not the hedge fund giants on Wall Street – to fund private startups.

And that’s the structure utilized by Ticc Capital Corp. Because Ticc is a BDC, it’s required to distribute at least 90% of its income back to its investors.

That’s how Ticc pays its investors a quarterly dividend of $0.20 a share. With a share price of $6.55, the dividend yields 12.23% on your investment. That can add up to some serious income.

The average working person between ages 56 and 61 has $163,577 in savings. According to Fitz-Gerald, “TICC’s 12.23% yield would mean a $20,000 income stream a year – which amounts to $1,667/month of taxable income.”

While we don’t recommend putting your savings into one stock, the example shows just how powerful of an income generator Ticc can be for your extra money.

And Ticc is a well-run company. It has an operating cash flow of $315.16 million and a profit margin of nearly 10%. That ensures Ticc will be able to keep paying its huge dividend and can even raise it over the coming years.

The Best Stocks for Retirees, No. 4: New Residential Investment Corp.

New Residential Investment Corp.(NYSE:NRZ) is the most unique pick on our list, since it’s a real estate investment trust (REIT). NRZ manages a portfolio of real estate holdings and mortgages, which gives its investors exposure to the real estate market.

While REITs can be used to diversify a typical stock portfolio, they also bring their investors serious income.

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NRZ has over $70 billion in assets under management, and those assets bring NRZ a quarterly income of $356.79 million. And nearly all of that income gets passed on to NRZ’s investors since it’s a REIT.

“New Residential is required by the SEC to return 90% of taxable income to shareholders annually,” says Fitz-Gerald. “That means money in your pocket, if you’re one of ’em.”

NRZ pays a dividend of $0.50 a share, and with a share price of $16.95, its dividend yields 11.8% on your investment.

The Best Stocks for Retirees, No. 3: Lockheed Martin Corp.

Lockheed MartinCorp. (NYSE:LMT) is one of the best defense contractors in the world, and it’s hugely profitable.

With a profit margin of 10.37% and total revenue of $47.2 billion annually, the company is raking in a profit of nearly $5 billion a year. And in 2017, the company announced it was increasing its yearly profit projections by 5%.

You see, LMT is an exceptionally well-managed company with billions in government contracts across the world. But it’s also plugged in to the Unstoppable Trend of war, terrorism & ugliness.

The key to making huge profits is to find “must-have” companies that fall into what Fitz-Gerald calls the six “Unstoppable Trends”: medicine, technology, demographics, scarcity & allocation, energy, and war, terrorism and ugliness (also known as “defense”). The Unstoppable Trends are backed by trillions of dollars that Washington cannot derail, the Fed cannot meddle with, and Wall Street cannot hijack.

That means LMT is always going to be in demand, no matter what else is going on in the broader market. That lets LMT pay its investors a massive $2.00 dividend per share. That’s right, the company will pay you $2 a quarter just for owning its stock.

And it’s likely you’ll be growing your money by doing that, too. LMT is up 32% over the last year, jumping from $237.39 a share to $312.67 a share today. Analysts are projecting it could hit $340 a share.

That’s a nice profit opportunity for ahigh-dividend income stock.

And we’ve saved the best for last. Our last two income stocks for retirement are our top picks, including one paying a dividend that yields over 17%…

The Best Stocks for Retirees, No. 2: Arlington Asset Investment Corp.

Arlington Asset Investment Corp.(NYSE:AI) is another BDC, but this one focuses on owning government debt.

That may sound like a dull business model, but rest assured, it’s a lucrative one. AI has nearly $5 billion in its portfolio and is massively profitable.

With a profit margin of 38.8%, AI is able to funnel more than three times the profit of any stock on this list back to its investors.

That’s how it manages a dividend yield of a whopping 17.17%, the biggest dividend on our list. And the best part is AI is likely to continue growing its dividend.

Fitz-Gerald especially likes AI because of its long-term stability, which is essential for it to keep paying such a spectacular dividend.

“This stability is exactly what you’d expect from a business gathering income through U.S. government-backed mortgages,” Fitz-Gerald said. “It may not be the most exciting field, but it sure pays the bills, as you’ll see from this company’s quarterly dividend income stream.”

In fact, AI has upped its dividend 92% since 2010.

The Best Stocks for Retirees, No. 1: ABB Ltd.

ABB Ltd.(NYSE ADR:ABB) is a Swiss company specializing in electrification, but that’s just the tip of the iceberg with this company.

Fitz-Gerald says the company is actually billing itself as a “technology leader,” and that’s important for its future.

“Not many investors realize this, but more than 55% of ABB’s sales are already from software and digitally enabled devices,” according to Fitz-Gerald.

That means ABB’s future is looking bright, but its income potential is what attracts us to it here.

ABB pays a dividend of $0.76 a share. With a share price of just $25.18, investors get access to that payout for a fraction of the cost of a stock like Johnson & Johnson (NYSE:JNJ), which pays a dividend of $0.84 per $132.77 a share.

You see, Fitz-Gerald is a believer in the maxim that “price is what you pay, but value is what you get,” and ABB delivers value.

Plus it fits all three of Fitz-Gerald’s criteria for finding value in stocks, which is essential to maintaining income.

“My goal is to find a high-quality business with a proven track record, savvy management, and plenty of profit potential,” says Fitz-Gerald. And ABB stacks up with all of them.

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‘Dividend Aristocrat’ General Dynamics Has Big Risks in 2018

General Dynamics Corporation (NYSE:GD) is a one of The Dividend Aristocrats, a group of 51 companies in the S&P 500 Index, with 25+ consecutive years of dividend increases. Aerospace and defense company General Dynamics is the newest member of the Dividend Aristocrats, having joined the list in 2017.

Not only has the company increased its dividend for 25 consecutive years, but the stock has rewarded investors with huge share price gains. General Dynamics stock has tripled in the past five years.

General Dynamics stock has potential for 10% annual dividend growth. However, the valuation of GD could be a risk factor moving forward.

Business Overview For GD Stock

General Dynamics currently generates annual sales above $30 billion. It has a large aerospace segment which is the core of the business.

General Dynamics was incorporated in 1952, through the combination of the Electric Boat Company, Canadair, and several others.

The company has evolved over the years, to enter new businesses of the future. The biggest transformation came in the 1990’s, when General Dynamics started buying technology-oriented companies.

For example, General Dynamics acquired Defense Systems from the Lockheed Martin Corporation (NYSE:LMT), Advanced Technology Systems, and Computing Devices International. In 1999, it acquired GTE Government Systems.

All these acquisitions established the foundation of the company’s Information Systems and Technology group.

Today, General Dynamics has a diversified business model. Its most profitable segment is Aerospace, which primarily manufactures business jets, under the Gulfstream brand.

Source: 2016 Annual Report, page 2

Its products and services include aviation, combat vehicles, weapons systems, and munitions.

Other reporting segments include Combat Systems, Information Systems & Technology and Marine Systems.

The Combat Systems business manufactures combat vehicles, and related weapons systems and munitions.

The Information Systems and Technology business sells technologies to the military and for civilian, state and commercial purposes.

Lastly, the Marine Systems group builds nuclear-powered submarines and surface combatants for the U.S. Navy, and also Jones Act vessels.

Growth Prospects for General Dynamics

General Dynamics stock has produced strong earnings growth in recent years, and the trend should continue moving forward.

Total revenue declined 0.4% in 2016, due to the strong U.S. dollar, which negatively impacted the company’s international business. In addition, aerospace revenue declined 5% because of falling Gulfstream jet orders.

Fortunately, growth in other businesses helped offset these declines.

For example, revenue increased 2% in the Information Systems & Technology and Marine Systems segments.

And, General Dynamics cut costs to boost margins. Operating margin of 13.7% in 2016 was up 40 basis points from the previous year.

Overall, General Dynamics stock’s earnings-per-share increased 8.7% in 2016. The company generated a strong 18% return on invested capital. Operating earnings, ROIC, and dividends have all increased steadily in the past few years.

Source: 2016 Annual Report, page 10

General Dynamics is off to a good start in 2017. Earnings-per-share from continuing operations increased 6.8% over the first three quarters, driven by operating profit growth of 13% and 11% in combat systems and aerospace, respectively.

Moving forward, General Dynamics will benefit from growth in defense spending, both in the U.S. and the international markets.

Furthermore, President Trump has advocated for higher levels of defense spending in the U.S., which would be a tailwind for General Dynamics.

In addition, international markets are likely to continue raising defense spending as well. Geopolitical risk remains elevated across many parts of the world.

Demand for General Dynamics’ products and services remains strong, evidenced by a total project backlog of $63.9 billion last quarter, which was up 9% from the previous quarter.

Competitive Advantages & Recession Performance

General Dynamics has several competitive advantages. First, it operates in defense, which has high barriers to entry. Defense companies rely on contracts from the U.S. and foreign governments. A small competitor would have difficulty entering the defense industry and trying to take share.

In addition, General Dynamics has industry-leading brands, such as Gulfstream and Stryker. It has built these brands with significant research and development spending:

2014 research-and-development expense of $358 million 2015 research-and-development expense of $395 million 2016 research-and-development expense of $418 million

This R&D helps the company secure its position among its competitors.

General Dynamics is built to last. The company performed very well during the last recession:

2007 earnings-per-share of $5.10 2008 earnings-per-share of $6.13 (20% increase) 2009 earnings-per-share of $6.20 (1.1% increase) 2010 earnings-per-share of $6.82 (10% increase)

As you can see, the company grew earnings in each year of the recession, including two years of double-digit growth. It would not be easy to find many companies that grew earnings-per-share by 20% in 2008, but General Dynamics did it.

One major reason for the company’s excellent recession performance, is because it sees steady demand for its products and services each year. The world has many dangerous places. Global conflicts are not likely to cease any time soon, regardless of the economic climate.

And, General Dynamics’ revenue is secured by long-term contracts with its customers. This also keeps earnings intact during recessions.

Valuation & Expected Returns

General Dynamics stock has a price-to-earnings ratio of 20.2. This is significantly above its 10-year average price-to-earnings ratio of 12.5.

Source: Value Line

At its current price-to-earnings ratio, General Dynamics is trading at a roughly 62% premium to its 10-year average. As a result, if the stock were to revert to its average valuation, it would cause a significant loss.

We believe fair value for General Dynamics to be a price-to-earnings ratio of approximately 17-18. This is closer to the average valuation in the years since the Great Recession, which includes a more normal economic environment.

Using a fair price-to-earnings ratio of 17-18, and the company’s expected 2017 adjusted earnings of $9.70, yields a fair value estimate of $165 to $175.

Aside from changes in the valuation multiple, future returns will be comprised of earnings growth and dividends. In the past 10 years, the company increased earnings-per-share by approximately 7% per year. This seems to be a reasonable set of expectations for future growth.

As a result, potential returns could be as follows:

3%-4% revenue growth 5% margin expansion 2%-3% share repurchases 6% dividend yield

In this forecast, total returns would reach approximately 7%-9% per year, including dividends. However, a contracting price-to-earnings ratio would reduce total returns.

Final Thoughts on General Dynamics Stock

General Dynamics is a high-quality business, with a long history of growth. Geopolitical risk remains a constant, which gives the company a long runway of growth going forward.

General Dynamics is a shareholder-friendly company, and should continue returning significant cash to shareholders through buybacks and dividends.

At this time, General Dynamics appears overvalued. It may be sensible for investors to wait for the price-to-earnings ratio to decline into the teens, with a 2% dividend yield or higher before buying.

Please send any feedback, corrections, or questions to ben@suredividend.com.

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‘Dividend Aristocrat’ General Dynamics Has Big Risks in 2018

General Dynamics Corporation (NYSE:GD) is a one of The Dividend Aristocrats, a group of 51 companies in the S&P 500 Index, with 25+ consecutive years of dividend increases. Aerospace and defense company General Dynamics is the newest member of the Dividend Aristocrats, having joined the list in 2017.

Not only has the company increased its dividend for 25 consecutive years, but the stock has rewarded investors with huge share price gains. General Dynamics stock has tripled in the past five years.

General Dynamics stock has potential for 10% annual dividend growth. However, the valuation of GD could be a risk factor moving forward.

Business Overview For GD Stock

General Dynamics currently generates annual sales above $30 billion. It has a large aerospace segment which is the core of the business.

General Dynamics was incorporated in 1952, through the combination of the Electric Boat Company, Canadair, and several others.

The company has evolved over the years, to enter new businesses of the future. The biggest transformation came in the 1990’s, when General Dynamics started buying technology-oriented companies.

For example, General Dynamics acquired Defense Systems from the Lockheed Martin Corporation (NYSE:LMT), Advanced Technology Systems, and Computing Devices International. In 1999, it acquired GTE Government Systems.

All these acquisitions established the foundation of the company’s Information Systems and Technology group.

Today, General Dynamics has a diversified business model. Its most profitable segment is Aerospace, which primarily manufactures business jets, under the Gulfstream brand.

Source: 2016 Annual Report, page 2

Its products and services include aviation, combat vehicles, weapons systems, and munitions.

Other reporting segments include Combat Systems, Information Systems & Technology and Marine Systems.

The Combat Systems business manufactures combat vehicles, and related weapons systems and munitions.

The Information Systems and Technology business sells technologies to the military and for civilian, state and commercial purposes.

Lastly, the Marine Systems group builds nuclear-powered submarines and surface combatants for the U.S. Navy, and also Jones Act vessels.

Growth Prospects for General Dynamics

General Dynamics stock has produced strong earnings growth in recent years, and the trend should continue moving forward.

Total revenue declined 0.4% in 2016, due to the strong U.S. dollar, which negatively impacted the company’s international business. In addition, aerospace revenue declined 5% because of falling Gulfstream jet orders.

Fortunately, growth in other businesses helped offset these declines.

For example, revenue increased 2% in the Information Systems & Technology and Marine Systems segments.

And, General Dynamics cut costs to boost margins. Operating margin of 13.7% in 2016 was up 40 basis points from the previous year.

Overall, General Dynamics stock’s earnings-per-share increased 8.7% in 2016. The company generated a strong 18% return on invested capital. Operating earnings, ROIC, and dividends have all increased steadily in the past few years.

Source: 2016 Annual Report, page 10

General Dynamics is off to a good start in 2017. Earnings-per-share from continuing operations increased 6.8% over the first three quarters, driven by operating profit growth of 13% and 11% in combat systems and aerospace, respectively.

Moving forward, General Dynamics will benefit from growth in defense spending, both in the U.S. and the international markets.

Furthermore, President Trump has advocated for higher levels of defense spending in the U.S., which would be a tailwind for General Dynamics.

In addition, international markets are likely to continue raising defense spending as well. Geopolitical risk remains elevated across many parts of the world.

Demand for General Dynamics’ products and services remains strong, evidenced by a total project backlog of $63.9 billion last quarter, which was up 9% from the previous quarter.

Competitive Advantages & Recession Performance

General Dynamics has several competitive advantages. First, it operates in defense, which has high barriers to entry. Defense companies rely on contracts from the U.S. and foreign governments. A small competitor would have difficulty entering the defense industry and trying to take share.

In addition, General Dynamics has industry-leading brands, such as Gulfstream and Stryker. It has built these brands with significant research and development spending:

2014 research-and-development expense of $358 million 2015 research-and-development expense of $395 million 2016 research-and-development expense of $418 million

This R&D helps the company secure its position among its competitors.

General Dynamics is built to last. The company performed very well during the last recession:

2007 earnings-per-share of $5.10 2008 earnings-per-share of $6.13 (20% increase) 2009 earnings-per-share of $6.20 (1.1% increase) 2010 earnings-per-share of $6.82 (10% increase)

As you can see, the company grew earnings in each year of the recession, including two years of double-digit growth. It would not be easy to find many companies that grew earnings-per-share by 20% in 2008, but General Dynamics did it.

One major reason for the company’s excellent recession performance, is because it sees steady demand for its products and services each year. The world has many dangerous places. Global conflicts are not likely to cease any time soon, regardless of the economic climate.

And, General Dynamics’ revenue is secured by long-term contracts with its customers. This also keeps earnings intact during recessions.

Valuation & Expected Returns

General Dynamics stock has a price-to-earnings ratio of 20.2. This is significantly above its 10-year average price-to-earnings ratio of 12.5.

Source: Value Line

At its current price-to-earnings ratio, General Dynamics is trading at a roughly 62% premium to its 10-year average. As a result, if the stock were to revert to its average valuation, it would cause a significant loss.

We believe fair value for General Dynamics to be a price-to-earnings ratio of approximately 17-18. This is closer to the average valuation in the years since the Great Recession, which includes a more normal economic environment.

Using a fair price-to-earnings ratio of 17-18, and the company’s expected 2017 adjusted earnings of $9.70, yields a fair value estimate of $165 to $175.

Aside from changes in the valuation multiple, future returns will be comprised of earnings growth and dividends. In the past 10 years, the company increased earnings-per-share by approximately 7% per year. This seems to be a reasonable set of expectations for future growth.

As a result, potential returns could be as follows:

3%-4% revenue growth 5% margin expansion 2%-3% share repurchases 6% dividend yield

In this forecast, total returns would reach approximately 7%-9% per year, including dividends. However, a contracting price-to-earnings ratio would reduce total returns.

Final Thoughts on General Dynamics Stock

General Dynamics is a high-quality business, with a long history of growth. Geopolitical risk remains a constant, which gives the company a long runway of growth going forward.

General Dynamics is a shareholder-friendly company, and should continue returning significant cash to shareholders through buybacks and dividends.

At this time, General Dynamics appears overvalued. It may be sensible for investors to wait for the price-to-earnings ratio to decline into the teens, with a 2% dividend yield or higher before buying.

Please send any feedback, corrections, or questions to ben@suredividend.com.

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