5 Stocks at Risk of Falling off the Fiscal Cliff

NEW YORK (Stockpickr) -- The U.S. presidential election is now less than two months away. And with almost everyone in Washington squarely focused on that event, little new legislation will be passed.

That means the "fiscal cliff" will linger into November and beyond. This cliff, which calls for a wide range of automatic spending cuts and tax hikes at the end of 2012, is seen as such a draconian move that few have believed it will really happen. Yet in recent weeks, a small chorus of investors is beginning to wonder if such a cavalier attitude is warranted.

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Washington has achieved little in recent years, and it may be unwise to expect our nation's legislators to wake up and take action at the very last minute. Many politicians appear more inclined to score points against rivals than actually figure out ways to hammer out bipartisan agreements. So we may just head over that cliff anyway.

If so, many companies are very vulnerable. The U.S. government buys a wide range of goods and services every year, and massive automatic cuts would mean that virtually every government contract would need to be re-written.

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Here are five companies that can ill afford to see the fiscal cliff put into action.

 

General Dynamics

Though many defense stocks count on the U.S government for a big part of their revenue, few are as vulnerable as General Dynamics (GD), which has been slow to pursue international sales to offset possible U.S. defense cuts.

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Not only that, but GD has made a big push into information technology, taking on many systems and projects that the U.S. government has outsourced in the past decade. As the government tightens its belt in the years ahead, outsourcing is expected to be replaced by "insourcing" as contracts are cut.

Goldman Sachs noted in a July 2012 report that "GD has the largest exposure to Government IT & Services and to the US Army of any of the large-cap Defense primes, two end markets which we expect to be the most challenged within the Defense sector for several years." Goldman sees shares falling from a recent $66 to $56.

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