As we enter Week 6 of the fight, the Defense Portfolio continues its long, hard slog versus Mr. Market. Here at the month-and-a-half mark, we're underperforming the market by 12.2 percentage points, and I have to admit, folks -- morale is at an all-time low.
While I suspect a counterattack is imminent (and the S&P's recent implosion should close the gap considerably) we won't see those results till next week's issue of this column.
Meanwhile, the news circa last Thursday is grim:
| Company | Starting Price* | Recent Price | Total Return |
|---|---|---|---|
| General Dynamics (NYSE: GD) | $51.54 | $57.08 | 10.7% |
| Raytheon (NYSE: RTN) | $42.27 | $47.59 | 12.3% |
| Lockheed Martin (NYSE: LMT) | $78.28 | $75.40 | (3.7%) |
| AeroVironment | $29.96 | $29.65 | (1%) |
| iRobot | $11.49 | $11.14 | (3%) |
| Force Protection (NYSE: FRPT) | $4.57 | $4.68 | 2.4% |
| AVERAGE RETURN |
|
| 3% |
| S&P Spyder | $88.17 | $101.57 | 15.2% |
| DIFFERENCE |
|
| (12.2%) |
Source: Yahoo! Finance. *Tracking began on July 10, 2009. Portfolio is equal-weighted, with "recent price" being set at market close on the Thursday preceding publication, and adjusted for stock splits and dividends.
It's almost enough to make a Fool wave the white flag of surrender. But then I remind myself: These stocks never surrender. Let's take a look at how some of my portfolio fared in the previous week, and also pivot back to look at news in the larger defense field.
Onward, robotic soldiers
Take tiny iRobot (please -- it's lost me 3% since I picked it!)
Just kidding. The stock may be down, but iRobot is still in this fight. Last week, it announced two separate orders from the military. First, the Navy ordered $13.5 million worth of PackBot IED disarming robots, in an indefinite delivery, indefinite quantity contract. No sooner had that news come out than in marched the Army, placing an order for $5 million more PackBots Wednesday.
Nearly $20 million in new orders, for a company that sells barely $300 million in product annually? Not bad for a week's work.
Look north, young aerospace investor ...
But iRobot wasn't the only defense contractor to book big orders last week. Beleaguered Boeing (NYSE: BA), reeling from its latest 787 Nightmare Liner setback, got a big boost from up north, when the Canadian military ordered 15 of its heavy-lift Chinook helicopters for a total price of $1.15 billion. Added bonus for the U.S. industrial sector? They will be equipped with Honeywell (NYSE: HON) engines.
And then Midwest
And speaking of large amounts of cash, the savvy folks over at Oshkosh (NYSE: OSK) grabbed opportunity by the horns last week. After enjoying a post-M-ATV boost that sent the shares soaring north of $32 in the space of a month (a clean double and more), Oshkosh decided to cash in on its hard work -- and cash out some shares. Floating 14.9 million new common shares at an offer price of $25 a pop, Oshkosh raised $358 million net of its bankers' fees.
From the perspective of existing shareholders, this works out to about 20% dilution of their ownership stake -- so it's not unabashedly good news. But on the plus side, $358 million can go a long way toward paying off down Oshkosh's crushing debt load. Here's hoping.
Back to the portfolio
But the biggest news of the week concerned Defense Portfolio stalwart Lockheed Martin. No, I'm not talking about Tuesday's big $140 million deal to sell C-130J transports to Iraq. That was actual news. The bigger story on Lockheed was Thursday's rumor that the F-35 Lightning may not be long for this world.
According to the "Center for Strategic and Budgetary Assessments" (CSBA), a Washington, D.C. think tank with reported close ties to the Obama Administration, Lockheed's newest fighter jet is too expensive, and the Pentagon wants to buy too dang many of the things. CSBA thinks the better idea is to cut orders for F-35s from the budget, buy a handful of long-range bombers to take their place, and fill in any gaps in defense policy with a few flying model airplanes.
I'm simplifying and hyperbolizing, of course, and you can probably guess where I stand in this debate. If you can't, click here to read the whole story. We've got quite a lively discussion going on over whether the CSBA and Congress have any clue whatsoever what they're doing
As we enter Week 6 of the fight, the Defense Portfolio continues its long, hard slog versus Mr. Market. Here at the month-and-a-half mark, we're underperforming the market by 12.2 percentage points, and I have to admit, folks -- morale is at an all-time low.
While I suspect a counterattack is imminent (and the S&P's recent implosion should close the gap considerably) we won't see those results till next week's issue of this column.
Meanwhile, the news circa last Thursday is grim:
| Company | Starting Price* | Recent Price | Total Return |
|---|---|---|---|
| General Dynamics (NYSE: GD) | $51.54 | $57.08 | 10.7% |
| Raytheon (NYSE: RTN) | $42.27 | $47.59 | 12.3% |
| Lockheed Martin (NYSE: LMT) | $78.28 | $75.40 | (3.7%) |
| AeroVironment | $29.96 | $29.65 | (1%) |
| iRobot | $11.49 | $11.14 | (3%) |
| Force Protection (NYSE: FRPT) | $4.57 | $4.68 | 2.4% |
| AVERAGE RETURN |
|
| 3% |
| S&P Spyder | $88.17 | $101.57 | 15.2% |
| DIFFERENCE |
|
| (12.2%) |
Source: Yahoo! Finance. *Tracking began on July 10, 2009. Portfolio is equal-weighted, with "recent price" being set at market close on the Thursday preceding publication, and adjusted for stock splits and dividends.
It's almost enough to make a Fool wave the white flag of surrender. But then I remind myself: These stocks never surrender. Let's take a look at how some of my portfolio fared in the previous week, and also pivot back to look at news in the larger defense field.
Onward, robotic soldiers
Take tiny iRobot (please -- it's lost me 3% since I picked it!)
Just kidding. The stock may be down, but iRobot is still in this fight. Last week, it announced two separate orders from the military. First, the Navy ordered $13.5 million worth of PackBot IED disarming robots, in an indefinite delivery, indefinite quantity contract. No sooner had that news come out than in marched the Army, placing an order for $5 million more PackBots Wednesday.
Nearly $20 million in new orders, for a company that sells barely $300 million in product annually? Not bad for a week's work.
Look north, young aerospace investor ...
But iRobot wasn't the only defense contractor to book big orders last week. Beleaguered Boeing (NYSE: BA), reeling from its latest 787 Nightmare Liner setback, got a big boost from up north, when the Canadian military ordered 15 of its heavy-lift Chinook helicopters for a total price of $1.15 billion. Added bonus for the U.S. industrial sector? They will be equipped with Honeywell (NYSE: HON) engines.
And then Midwest
And speaking of large amounts of cash, the savvy folks over at Oshkosh (NYSE: OSK) grabbed opportunity by the horns last week. After enjoying a post-M-ATV boost that sent the shares soaring north of $32 in the space of a month (a clean double and more), Oshkosh decided to cash in on its hard work -- and cash out some shares. Floating 14.9 million new common shares at an offer price of $25 a pop, Oshkosh raised $358 million net of its bankers' fees.
From the perspective of existing shareholders, this works out to about 20% dilution of their ownership stake -- so it's not unabashedly good news. But on the plus side, $358 million can go a long way toward paying off down Oshkosh's crushing debt load. Here's hoping.
Back to the portfolio
But the biggest news of the week concerned Defense Portfolio stalwart Lockheed Martin. No, I'm not talking about Tuesday's big $140 million deal to sell C-130J transports to Iraq. That was actual news. The bigger story on Lockheed was Thursday's rumor that the F-35 Lightning may not be long for this world.
According to the "Center for Strategic and Budgetary Assessments" (CSBA), a Washington, D.C. think tank with reported close ties to the Obama Administration, Lockheed's newest fighter jet is too expensive, and the Pentagon wants to buy too dang many of the things. CSBA thinks the better idea is to cut orders for F-35s from the budget, buy a handful of long-range bombers to take their place, and fill in any gaps in defense policy with a few flying model airplanes.
I'm simplifying and hyperbolizing, of course, and you can probably guess where I stand in this debate. If you can't, click here to read the whole story. We've got quite a lively discussion going on over whether the CSBA and Congress have any clue whatsoever what they're doing
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