How to Play Defense Stocks Into the Election

We've had some interesting pullbacks of late that are really worth highlighting. The defense stocks in particular -- not just because I just got off the USS Harry S Truman, a nuclear carrier -- seem ripe for the buying. We have seen a tremendous hammering in this group as if, somehow, the anointing of Obama means the winning of Obama and then somehow the vivisection of the Defense Department's budget.

It's simplistic thinking. I believe that the stocks, as they go down, are excellent buys on cash flow and on a chance that the single most pro-defense presidential candidate since Scoop Jackson ran in the 1970s could be elected.

This is one of those compelling risk/reward situations where you could find yourself picking up some Raytheon (RTN - commentary - Cramer's Take), Northrop Grumman (NOC - commentary - Cramer's Take) or General Dynamics (GD - commentary - Cramer's Take) (Lockheed Martin (LMT - commentary - Cramer's Take) refuses to come in so is now my least favorite) and you can win either way. I think Obama has to tack extremely right to win, and the easiest way to do that is simply to call for a strong defense and ram it home by visiting defense plants and talking about the need for non-Iraqi strong defense elements.

The propensity is to want to sell GD off, that as it is the most linked to Iraq with the exception of Alliant. But why not split the difference? I have been buying Raytheon ,and I think Northrop Grumman is terrific and in some ways L-3 Communications (LLL - commentary - Cramer's Take) might be best because it is the Democrats' defense company, with all of the homeland security counterterrorism plays.

The Obama hoopla will die down, and I believe be replaced with pro-defense talk. This might be the moment to be buying this group or swapping out of LMT and into the other hard-hit ones. Then hold them into the election and be prepared to win either way!

At the time of publication, Cramer was long Raytheon.

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