Cramer: After Armor, Watch These Two Defense Stocks

This column was originally published on RealMoney on May 7 at 9:10 a.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Of all the areas where the analysts remain way too negative, the defense sector of the economy has to take the cake. The analysts simply refuse to believe that we won't wake up one day and say, "That's it, no more war." They act as if the Democrats would just as soon reduce our defense budget to that of Britain, or worse, Japan.

It's not going to happen. The Democrats, particularly the leading Democrat, Sen. Hillary Clinton, would do nothing to cut back spending. In fact, I believe they would increase spending on anything that protects soldiers.

That's why the Armor Holdings(AH Quote) bid is so important. It reminds us that this end of tech is going to be big for a very, very long time. BAE Systems isn't buying something for the last year or two of the Iraq war.

But now Armor Holdings is done. Who else in the group is too cheap?

The two best that are left, the two obvious plays on soldiers themselves, are Alliant Tech(ATK Quote) and Ceradyne(CRDN Quote). Alliant, the bullet maker, just keeps blowing away the numbers and buying back stock. It has taken almost 5 million shares off what was a base of 39 million shares three years ago. That's the real deal.

Ceradyne, the body-armor company, is even more interesting. This company has never gotten the respect it deserves, never. It keeps doing better than expected and it keeps getting dissed as a company that is going to run out of soldiers to outfit, as if we are going to shrink the Army and send everyone home. Meanwhile, it keeps developing other uses for ceramics and remains a really well-run company.

To me, Ceradyne feels like Armor Holdings, a company that finally couldn't take the disrespect anymore.

I would buy both Alliant and Ceradyne in light of this Armor Holdings deal.