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Friday, 03/07/2003

The Clamor of Sabers - All is not quiet on the Western Front
by Steve Gail

The hills are alive, but not with the sound of music. We are hearing phrases from the middle east like saber rattling, weapons of mass destruction, threat of terrorism, the need for changing of regime, escalation of American presence in the region. Additionally, from the east we hear the cry of Nuclear proliferation, build-up, confrontation by North Korea. This is far from the best of times, but potentially this could be the worst of times. However, the economic heart beat of America goes on regardless of potential hot spots in the world. As we alluded to in an earlier article, adversady often leads to opportunity for those that are willing to see the light at the end of the tunnel and not to confuse it with lights from an on coming train. War, unfortunately, brings that opportunity to the forefront. DRIP plan buyers need to take heed. Just as we looked at energy related issues that would be influenced by a war with Iraq, an examination should be made of the Defense related industry to see what opportunities might present themselves in the long run. Remember market direction, bullish or bearish, has no bias for or against political correctness. With that thought in mind let's examine some potential beneficiaries from a confrontation with Iraq.

Exhibit A:

Notice that these are the six (6) Defense Stocks that offer DRIP plans with optional cash plans. In case any of you are not familiar with these companies. They do the following:

Curtiss-Wright - producer of actuation components and systems for various aircraft
Lockheed Martin - spacecraft, missles, launch vehicles. Nuclear service. 71% of there business is with the US Department of Defense'
Kaman A - Helicopters, Prime Contractor for SH-2 military copter & K-Max commerical Helicopter.
United Industrial - provides weapon systems, un-manned systems and weather monitoring.
GenCorp - contractor for U.S Government Titan, Hawk and Minuteman missles
Rockwell Collins - provides air transport, aviation, business and military in flight systems

These companies are in a position to potentially profit from any war scenario. Remember after the smoke all clears, the U.S. war machine will have to be restocked and losses replaced. This means new Defense contracts going out to bid, and potentially increased revenues. Investors in DRIPS looking at Defense stocks ( not to be confused with Defensive stocks, need to realize that the Military Industrial complex may appear to be in a slow growth area in terms of other sectors of the economy, however there will always be a need for these companies to supply America's Defensive Department with the ability to stand ready at all times to defend the red, white and blue.

In parting let's examine the total return from the top five (5) companies from the list above.

As you can see the returns have averaged anywhere from between 19.19% (high) and to a low of 1.79%.

In closing, one must go back to the oldest of investment philosophies which says nothing replaces researching your final investment choices.

In a war there are no real winners and unfortunately, Wall Street's blood only runs green.

Until next time,

 
 

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