General Dynamics Corp. (GD)

(Market Call Minute.) Defence spending is going up no matter who wins the US presidential election.

A defence company, so slower growth, a very strong cash flow generator. Doesn’t have a huge amount of growth, but provides a dividend yield of about 2%.

This is about one quarter aerospace with the rest in military defence. The world’s 4^th largest military contractor. They make the Gulfstream jets, submarines and combat vehicles. With the US presidential election coming up, there is going to be more increased scrutiny and more spending on defence and security budgets. The stock hasn’t done very much in the last 12 months, but that has created a bit of a valuation play. Just announced a $10 million share buyback. Trading at 16X forward earnings with a 9%-10% growth rate. Dividend yield of 1.94%.

Had a pretty good year in terms of demand, but it hasn’t translated into the share price going up. Has a pretty meaningful backlog, which is up close to 55% year over year. They already produce about 30% of the world’s business jets. He doesn’t own this primarily because the stock has really run up coming into this year. The wildcard is what is going to happen with the US government with the election coming. They generate about 85% of their revenue from the US government.

Has had a great move. There are a couple of big projects in the defence space including a long-range strategic bomber, and he thinks Northrop (NOC-N) gives a better leverage to that with the better risk/reward ratio. This is a very good company with a good outlook for defence spending.

It has had a good run. Russia and the Ukraine will focus investors on defense stocks. But this one is very overbought.

Thinks you will see a rethink of US policy toward Russia so he would be inclined to hold it here. He holds BA-N.

Is in a trend channel right now. It could move to the bottom of the trend channel.