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TheStreet Open House

6 Defense Picks for Diversification

Stocks in this article: GD LMT RTN

NEW YORK ( TheStreet) -- Defense and security-related stocks are raking in gains for investors. Stocks like Lockheed Martin (LMT - Get Report), Raytheon (RTN - Get Report) and L-3 Communications (LLL - Get Report) have delivered returns of 5% to 11% over the week ended Friday. Other stocks like General Dynamics (GD - Get Report), FLIR Systems (FLIR - Get Report) and American Science and Engineering (ASEI - Get Report) may offer upside in the upcoming days.

The stocks rose last week after the U.S. government announced cuts in defense spending that weren't as deep as predicted. The U.S. decided to slash around $80 billion in defense spending, including a cutback of up to 50,000 troops over the next five years.

Recent statement from the U.S. government indicate growing uneasiness about China's military clout, which could trigger a restart of some advanced projects that were kept on hold. This could unlock avenues in research and development. The opening up of big defense markets like India and Saudi Arabia also is positive news for U.S. defense companies.

The companies listed here are trading at an average of 10 to 15 times their earnings, and at a discount to their historical average of 15 to 20 times. The stocks are stacked in terms of percentage buy ratings, great to greatest.

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