Shares of Lockheed Martin (LMT:NYSE) are selling off in
today's trading session, largely due to a downgrade at
Barclays from Equal Weight (equivalent to Hold) to
Underweight (equivalent to Sell).
At the core of the downgrade is that the analysts
struggle to see the case for further upside in the stock
given the sustained rally in share price and especially
when compared to peers whose stocks may not yet have
gotten the boost from the secular growth in defense --
such as General Dynamics (GD:NYSE), which has
underperformed and therefore offers greatest risk/reward
profile for investors. The report also discusses a lower-
trending margin profile (although we would point out that
this comes coupled with strong growth across the
company's segments). That being said, the analysts still
love LMT management, its strong and growing portfolio,
and its proven track record of performance; they just do
not know if there is room to justify further
Why do we bring this up? We know it can be concerning to
see a position significantly underperform the market in
any given day, so we want to make sure to update
subscribers on the news when we can and provide our view
on whether the selloff is of particular concern. In this
case, while we understand the view of the analysts at
Barclays, our view on LMT has not changed. In fact, we
would even consider bulking up the position if we weren't
already carrying a full boat in the name (and if you are
new to the product, today's selloff could be one of few
opportunities to build the position).
We recognize that LMT shares have appreciated
considerably over the last couple of months, but we
expect the secular growth trend to continue into next
year and LMT is set to benefit as the best company in the
As an example, the Pentagon recently noted that it
expects the Canadian government to allow Lockheed's F-35
fighter aircrafts to compete to replace Canada's aging
CF-18 jets, demonstrating the importance of cooperation
among the allies in order to tackle increasing terrorism
threats (a deal with LMT would surely improve Canada's
air power). Lockheed wants to continue to expand its
order book beyond USA, and the opportunity to do so is
becoming increasingly more available as countries look to
bolster their defense systems. On top of this, the
prospect of potentially rebidding (and perhaps winning)
the big bomber contract is nothing to ignore.
All in, LMT is the largest and most liquid name in the
group (with steadily increasing dividends), and with
growth expected to continue for the foreseeable future,
it is likely to remain a favorite safe haven for
investors in this market where the only thing certain
seems to be uncertainty.
Jim Cramer, Portfolio Manager & Jack Mohr, Director of
Research - Action Alerts PLUS
DISCLOSURE: At the time of publication, Action Alerts
was long LMT.
We stand behind all our three retail names.
We will take advantage of UnitedHealth’s resilience to de-risk our portfolio.
Allergan-Pfizer merger highlighted a quiet week; we initiated a portfolio position and trimmed another.
Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.
David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
More than 30 investing pros with skin in the game give you actionable insight and investment ideas.
Want more than one service? Sign up to one of our packaged services and take advantage of amazing savings!
After the Bell
Before the Bell
Jim Cramer's Daily Booyah
Winners & Losers