Wall Street sure is in love with Richard Branson and his pioneering space tourism firm.
And who could blame them? I can, for one.
Branson’s company looks good on paper, of course.
After all, by all accounts, Branson is charming, charismatic, and intelligent. He’s a renowned adventurer and successfully founded Virgin Atlantic, a respected airline
And when his space tourism company, Virgin Galactic Holdings Inc. (SPCE), went public in October 2019, it caused quite a stir as an early mover in a groundbreaking new industry estimated to be worth $20 billion by 2030.
But Wall Street has been silent on one key metric. SPCE has been a poor performer in a generally strong market.
Indeed, since hitting a peak on February 11, the stock is off roughly 62% while the S&P 500 gained a respectable 7.6%.
With that in mind, today I want to recommend that you not invest in SPCE.
Instead, I have identified a storied space leader that recently tripled the overall market’s return as it turned in a stellar earnings report last week.
Let me show you why it can deliver where Richard Branson can’t…
Reaching for The Stars
Now then, you certainly couldn’t fault Branson for lack of ambition. He has that aspect totally nailed.
He’s not content with just being a space tourism firm. He wants to be the go-to firm in this budding sector.
That’s why the industry is anxious to see if he can make good on his plan to complete flight testing early next year.
Don’t get me wrong. Space tourism will be big in the future. But the larger overall space industry offers the opportunity to make money right now today.
After all, UBS says the industry will be worth $805 billion by 2030. We’re talking a double from the end of last year.
And that ‘s why I like Northrop Grumman Corp. (NOC). It has been a part of the space industry since the early days and will continue to be a major player moving forward.
This is a storied aerospace leader. When the space race began, Northrop ‘s TRW division was one of the first companies to begin work on satellites for the US space program.
By 1964, 218 of the 248 satellites launched by the US were readied by TRW.
Grumman built the lunar module that landed the first men on the moon. And by the ‘ 70s, it was building early warning satellite systems to monitor intercontinental ballistic missile (ICBM) launches during the Cold War.
And its work continues today for commercial, military, and government clients who have come to rely on the quality and reliability of Northrop Grumman systems.
Remember, a single satellite launch can cost between $50 million to $400 million. You don ‘t want to risk that money with a newcomer.
All the risks in space mean you want companies in your corner that have a track record of eliminating as many of those risks as possible.
It ‘s also no surprise that Northrop Grumman is highly prized for its military capabilities as well. It ‘s a leading player in autonomous aircraft and robots along with electronic warfare and advanced avionics and integrated command systems for the Navy.
But its strengths go far beyond sea and sky. It ‘s also a composite materials company that supplies commercial airline companies with parts – even the launch plane for Virgin Galactic.
In late March, it won a contract with the Missile Defense Agency for its Next Generation Interceptor program, to defend the country against long-range missile attacks.
This reinforces the company ‘s standing in the defense community for evolving its defense warning system in the ‘ 70s to an active defense system for today and tomorrow.
And it ‘s very well positioned in cybersecurity as well as “the networked battlefield.” This is the next generation of warfare where every aspect of the battle theater is connected in real-time with one another, from drones to ships to aircraft to land-based systems to headquarters.
This kind of network requires durability, speed, and most importantly, security. Northrop Grumman is a leader in this space as well.
The Strategic Outlook
While Northrop Grumman stock, as with most of the defense industry didn ‘t move much during the pandemic. NOC is now starting to make its run as Wall Street wakes up to the great story here.
Since the stock rebounded on February 16, it’s gained more than 21%. That is roughly triple the S&P 500’s gain over the period, with plenty more left in the tank.
Part of that stems from a growing realization that the Biden administration will need the types of products and services at which Northrop Grumman excels.
We’ve recently seen Russian troops massing on the Ukrainian border and Russian ships confronting US vessels in the Black Sea.
In his recent address to Congress, the president noted several times the heavy challenge that an ascendant China poses for us economically and militarily.
His speech came just weeks after China christened three major warships as part of its plan to dominate the Pacific, especially the strategically vital South China Sea.
So, it’s hard to see the US pushing back against these threats without Northrop Grumman playing a central role as a key defense firm.
And in the grand scheme of things, top-of-the-line companies are going to play an indispensable role in every aspect of the struggle to prevent China from asserting dominance.
But in the meantime, Northrop Grumman turned in a great earnings report for the first quarter, even with the pandemic going on.
Sales grew 6% in the period with net new contracts coming in at $8.9 billion. Even better, the company raised guidance for the full year.
But the real story here is profit growth. Adjusted per-share earnings gained 28%.
If we cut that to 22% to be conservative, per-share profits would double in less than 3.5 years.
That makes this a great long-term investment for both America’s future and your rising net worth.
Cheers and good investing,
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Source: Strategic Tech Investor