This Defense Stock is in My Top 5

Northrop Grumman (NYSE:NOC) has been around since 1939. It was one of the leading airplane makers in WWII and always was an aerospace innovator.

And it has been able to adapt to the changing needs of the armed forces and security forces over the years. That’s what has kept it such a solid company over all these years.

It still has a hand in building the state-of-the-art aircraft that the U.S. military flies today — like the B-1 bomber and its successor, the B-21 Raider.

The Raider is expected to cost $550 million and the Department of Defense wants 80-100 of them, a $55 billion deal. And some defense analysts say the deal is closer to $80 billion.

That is a significant long-term deal that shows the kind of faith the U.S. military and U.S. government have for NOC products.

The Bread and Butter for NOC stock

But those big-ticket wins are prestige contracts more than bread-and-butter contracts. That’s what makes for a successful defense company. You need to offer the armed services valuable products that serve their purposes well, because every system also has maintenance contracts and parts contracts to support that maintenance.

The best analogy is car dealerships. They don’t make the real money on selling the cars, they make it on the maintenance packages and repairs.

So today, it’s all about automation, whether it’s on land, air or sea. And NOC stock is one of the top producers of unmanned aerial vehicles (aka, drones) and other C5ISR (command, control, communications, cyber, computers and intelligence, surveillance and reconnaissance) tools.

For NOC the most important “C” of the five C’s is cyber. As a leader in this white-hot sector, there is huge growth potential for both the military and homeland security.

Just this week, the U.S. Navy announced its intention to build out a unmanned underwater autonomous vehicle (UUAV) that could carry weapons to disable a 160-foot ship.

There are new technologies regarding “rail guns” that don’t use gunpowder to fire shells from ships, but electricity. This would make the guns on ships far safer and allow for less munitions storage.

Lasers are also included in this strategy since lasers can fire great distances and are very accurate. Laser-based anti-missile systems are already in testing. NOC has an entire “directed energy” division that looks into making these expanding technologies viable.

It is also very involved in the cybersecurity and real-time “networked battlefield.” All these technologies allow forces to cover larger areas without having to put more troops at risk. And as we’ve seen, with Russia trying to expand its influence, China moving into the South China Sea and Iran and Israel looking for opportunities, defense will be getting all the funding it needs. And NOC will continue to be building the systems and equipment that the U.S. military is looking for.

— Louis Navellier

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Source: Investor Place