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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Rocket Stocks to Buy for a Santa Claus Rally

Stocks in this article: NOC CAH KORS CSCO SD

IT services is one of the big opportunities that NOC has to offer right now, and it's been able to secure lucrative contracts in other parts of the Federal government. Unmanned aerial vehicles offer somewhat of a cushion -- despite growing negative public sentiment for drones, the military see the aircraft as a way to heighten U.S. patrols in especially volatile areas without risking flight crews' lives. They should continue to be a growing portion of Northrop's sales as the firm fills orders at home and with allies. The firm's staunch technology focus (from UAVs to cyber security services) gives it a defensible niche against the more conventional contractors.

Financially, Northrop Grumman is in solid shape, with the firm's debt load almost fully offset by its cash on hand. Whlie that doesn't include Northrop's pension obligations (another $4 billion), the total balance sheet obligations aren't overblown. With rising analyst sentiment in this defense giant, we're betting on shares.

Cardinal Health

Pharmaceutical and medical instrument distributor Cardinal Health (CAH) is the middleman between pharma firms and the pharmacies and hospitals that sell drugs directly to consumers. When a retail pharmacy needs inventory, for instance, it turns to Cardinal's network to get warehoused and repackaged drugs -- sparing either of the other parties from needing expertise in those tasks.

That's a good business -- if you can get it. Because Cardinal doesn't really have an economic moat, its profits are pretty highly scrutinized by both the pharmaceutical firms and the pharmacies. Theoretically, if being the middleman is too lucrative, then someone else can step in to do it cheaper. But Cardinal's big advantage is scale. Because firm boasts enormous clients like CVS Caremark (CVS) and Walgreen (WAG), CAH can focus on efficiency and keep its costs lower than any individual smaller rival. So while Cardinal's net margins weigh in at right around one percent, it's earning one percent on almost $110 billion a year.

Cardinal's balance sheet is in solid shape, with total debt almost completely offset by cash on hand. The firm's impressive cash flow generation means that Cardinal can pay out a consistently strong dividend in spite of its paper-thin margins. While this firm may not have a moat, its business is less easily replicated than it may seem at first glance.

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