Sneak Preview: Take Off With Aerospace

On Wall Street, we often group aerospace with defense. That's because the analysts who understand planes can follow the defense plays that have an aerospace component.

In this particular case, there's more than just convenience to the marriage. The U.S. is home to most of the world's major defense contractors, and we have become a giant exporter of the tools of war. We are arms merchants, financing billions and billions of dollars to arm Saudi Arabia and Israel and Egypt for many years to come. Plus, in our own country post-9/11, both political parties have remained committed to military spending, something that will continue even if we eventually wind up our efforts in Iraq.

That means Raytheon (RTN), Lockheed Martin (LMT), General Dynamics (GD), Northrop Grumman (NOC) and L-3 (LLL), the major defense contractors, have what is known as "visibility," meaning they can see orders many years out.

Oh, and don't forget that Boeing is one of the top five defense contractors too. Boeing could stay in bull-market mode just from defense for years to come.

There are lots of smaller defense plays, such as Alliant Techsystems (ATK), the nation's largest bullet maker, that will make sense as long as the Iraq War continues, but I prefer to go with the larger defense contractors that have far more overseas business than the smaller ones, which are almost entirely dependent on the U.S. military.

Editor's note: This is a special sneak preview of Jim Cramer's just-released book, Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer). Look for more sneak previews every day, and get your free copy with your annual subscription to Action Alerts PLUS; click here for details. Catch Cramer in person to get it signed Saturday, Jan. 12, at 1 p.m. in Westbury, Long Island's Costco.

Missed the first sneak previews? Read the book intro and the rules of getting and staying rich: Rule 1, Rule 2, Rule 3, Rule 4 and Rule 5. Know what pros do right and amateurs do wrong: Part 1, Part 2, Part 3, Part 4 and Part 5.

>To order reprints of this article, click here: Reprints