GD shows up in Warren Buffett's portfolio as of the most recently reported period.

Computer Sciences

Fully one-third of technology services company Computer Sciences' ( CSC) $16 billion revenue base is tied to government contracts. In fact, almost every government agency uses CSC in some capacity, from the Navy to the IRS to motor vehicle departments. You can already see government budget pressures impacting this company. Fiscal first-quarter sales (ended June) rose just 1% from a year ago, the lowest growth rate in recent memory. In fact, revenues tied to commercial customers rose roughly 7%, offset by a 7% shrinkage in government work.

>>8 Tech Stocks Leading the Market

The fiscal cliff only exacerbates the pressure. Even if the lawmakers strike some sort of last-minute agreement to avert such a drastic move, they will still likely take a hatchet to any non-essential government spending, so projects such as IT modernization programs -- CSC's bread and butter -- are likely to be deferred or outright eliminated.

As of now, EPS for CSC is expected to drop from $3.24 in fiscal (March) 2012 to around $2.20 a share in the current fiscal year. Yet analysts see EPS rebounding back up towards the $3 mark in fiscal 2014, though that will be virtually impossible to achieve if the government's IT budget shrinks further, as many suspect.

Life Technologies

The U.S. government has long prided itself as a global leader in basic science research. From the National Science Foundation to the National Institutes of Health, billions have been spent on the sciences, often using this company's lab equipment.

Well, under the fiscal cliff scenario, spending on basic science and research would take a quick double-digit haircut, affecting such companies as Life Technologies ( LIFE) as well as science lab equipment providers Sigma-Aldrich ( SIAL) and Thermo-Fisher Scientific ( TMO).

Life also shows up on a recent list of 10 Stock Picks of the Highest-Rated Money Managers.


Defense contractor Raytheon ( RTN) clearly saw U.S. spending pressures coming and has been pushing to beef up its international business. The trouble is that governments elsewhere are also feeling pinched. That helps explain why Raytheon posted a book-to-bill of just 0.94 in the June quarter (which is a measure of new orders compared to revenues, and any number below 1.0 means backlog is shrinking).

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