This Stock is Ready to Rise (My Portfolio Grader gives it an “A” rating)

Booz Allen Hamilton (NYSE:BAH) was founded in Illinois in 1914 by Edwin Booz. He wanted to create a company that could look objectively at others and then offer suggestions on how to improve internal and external business execution. Basically, Booz Allen Hamilton was the birth of the corporate consultant.

While its first clients were major corporations like Goodyear (NASDAQ:GT) and Canadian Pacific Railway (NYSE:CP), the real game-changer came after World War II.

Like many companies that were around back then, the war — and its aftermath — provided a business watershed.

The History of BAH Stock

BAH started getting federal government contracts, as well as military contracts. It was also getting international contracts to help rebuild war-torn governments.

The U.S. government needed help organizing its growth as the nation’s needs and prosperity grew. And it was Booz Allen Hamilton that was there to help manage and staff it.

Beyond bragging rights for its executives, a company like this is able to deliver consistent earnings growth and perennial popularity on Wall Street — two hallmarks of my Growth Investor strategy that’s behind all the best stock picks of my career. This is what you call a bulletproof business model.

In Washington, there’s a term for all of these consulting firms filled with former military, technical and government top brass. Thanks to the depth of knowledge that these employees have, the term is “Beltway Bandits.” And BAH is the blue blood of the Beltway Bandits.

There are many key players in important positions that are on contract from BAH. Whether it’s engineering, tech or policy expertise, BAH is the go-to spot for talent.

Remember Edward Snowden, the man who released all that National Security Agency information? He was a consultant working with the NSA on behalf of Booz Allen Hamilton.

Outsourcing

Since former President Ronald Reagan’s administration, outsourcing has been a big concept in governments of all sizes, especially the federal government.

So, instead of hiring more analysts, intelligence agencies outsource the jobs to companies that specialize in intelligence workers — workers with security clearances who are usually former intelligence officers that can make a lot more money as a contractor. This concept works in every sector, from programmers to structural engineers to geologists.

In 2013, Bloomberg called Booz Allen Hamilton the world’s most profitable spy organization, due to its massive hiring after 9/11.

But BAH is far more than that. It’s still deeply involved in management consulting for both public and private organizations as well as the U.S. government. It’s also a thought leader on cybersecurity and telecommunications strategies.

And in an increasingly tense and digital world, security and organization are very important.

The company is now sporting a market cap of nearly $10 billion and continues to grow. Its fiscal first-quarter earnings beat estimates yet again. These earnings beats are what we need to see at Growth Investor, and any investor would do well to crunch these numbers.

Even if there’s a global slowdown, there’s enough chaos out there that many companies are interested in learning how to navigate this environment, and BAH is one of the best teachers.

BAH stock is up 139% in the past three years, 47% in the past 12 months and 58% year-to-date. Yet with all that growth behind and ahead, it’s trading at a trailing price-to-earnings ratio of just 23.5.

It’s no surprise then that my Portfolio Grader gives BAH stock an “A” rating.

What’s more, BAH stock offers something that’s irresistible in a low-interest-rate environment: a halfway decent dividend. Currently, shares are yielding 1.3% on top of the fat capital gains.

— Louis Navellier

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Source: Investor Place