Sunday, February 25, 2024
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3 Sorry Defense Stocks to Sell in February While You Still Can

Despite geopolitical tumult brewing, these defense stocks are not worthwhile investments.

Source: Gorodenkoff /

Defense stocks consists of equities investors turn toward during economic or geopolitical tumult. These can include manufacturing giants of planes, drones, tanks and other products used during conflicts. These days there is not only a war in Ukraine but also one in the Gaza Strip.

As a result, many investors have invested in defense stocks but not all have been good bets. Below are three, sorry defense stocks to sell in February.

Boeing (BA)

Boeing (NYSE:BA) is a stock that’s been going through a crisis of confidence in terms of its manufacturing capabilities, despite over decades the company has developed itself into a leading manufacturer of commercial and military aircraft, satellites, and rockets. There were two fatal crashes of its 737 MAX jet in 2019 and 2020.

Most recently, the emergency exit door bolts of a 737-MAX owned by Alaska Airlines flew off mid-flight, causing a depressurization event. While no one was seriously harmed, Boeing’s reputation certainly was. The Federal Aviation Administration (FAA), in turn, halted the expansion of 737-MAX manufacturing. Alaska Airlines CEO grounded the 737-MAX jets and mentioned the company had found more loose-bolts in many 737-MAX planes.

Moreover, the 737-MAX planes are not the only Boeing jets with manufacturing woes. There have been delays in the highly anticipated 737X and 777X programs, which would compete with Airbus’s A320neo and A350, respectively, have come to again tarnish the manufacturer’s reputation.

These delays and manufacturing inadequacies have, of course, blighted Boeing’s share performance. The aircraft manufacturer’s stock is down more than 20% for the year, and investors are perhaps better off selling now before things get worse.

Lockheed Martin (LMT)

Lockheed Martin (NYSE:LMT) is one of the largest U.S. weapons and military equipment manufacturers, deriving 73% of net sales from selling military equipment to the U.S. government in fiscal year 2022. The firm is also a global leader in aerospace and defense manufacturing, prodding products and services for military, civil and commercial customers worldwide.

Lockheed Martin has in the past benefitted from stable demand for its products and services from both domestic and international customers. Of course, much of this growth admittedly comes from the ever-burgeoning U.S. defense budget.

The weapons manufacturer’s stock skyrocketed after the October 7 attack in Israel, as investors anticipated a strong response from Israel. However, as the Gaza War has continued with any clear end, investors have begun to soften their optimism on LMT shares. Lockheed Martin’s stock has fallen nearly 7% YTD.

Northrop Grumman (NOC)

Northrop Grumman (NYSE:NOC) is another weapons manufacturer that received a boost after the October 7 attacks in Israel, jumping more than 8% on that day. For those who don’t know Northrop Grumman is known for developing drones and missile defense systems. The defense firm generated more than $39 billion in revenue and $2 billion in net income over the past twelve months.

Shares have traded downward since the start of trading in January. That is on top of the stock falling 13% in 2023. The company’s costly B-21 Stealth Bomber program with the U.S. Airforce was primarily to blame. Northrop’s fourth quarter earnings came in at a loss due to a $1.2 billion charge related to the running costs of the program.

On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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