Lockheed Martin (LMT)

He is going to steer clear of adding to his positions. It seems to be the most obvious choice because of the geopolitical concerns and Mr. Trump in the White House, but the price reflects all that. He is very leery of paying 25X earnings for an industrial company like this. Thinks it has gone too far and too quickly.

Has been very favourably disposed to this area. The stocks in this area are all very expensive. If you look at the geopolitical environment we are in now, the US doesn’t want to be the policeman or watchdog of the world. Feels the wind is at your back in the sector. You want to go with the major players, including Lockheed, Northrop Grumman (NOC-N), Raytheon (RTN-N).

The defence sector is the epitome of the sector he tries to find where there is something changing for the better. You can get an acceleration in cash flows, which means not only can you get growth in earnings and cash flow, but a multiple expansion over time. Defence sector is starting to grow after about 10 years of declining. Not only does it give you long-life contracts with lots of visibility, but you also have stuff inside these companies that you never hear about. (See Top Picks.)

The big aerospace company and defence contractor. One of the things on the Trump agenda is to spend a lot of money on defence, and the thought was that companies like this were going to do very well. On the other hand, there are a lot of people in Congress who are talking about bad US military spending, and that the buying process is broken. He would be cautious.

A US defence name, an area where she wants some exposure. She is waiting for a bit of a pullback in this space. Pres. Trump wants to increase his defence spending, which is a positive for all defence companies. However, there is a question of timing and funding. Feels that valuations are a little stretched right now.

This pays a nice dividend. They have a free cash flow yield that approaches 9%, so it is very profitable. Investors can expect to make the free cash flow yield plus any growth. A good start for investors to take a look at.

Trump is going to spend a lot on defensive. The guest has a company called Harris instead. But this space is a hold. Add on a pullback. It is a position you should have in your portfolio.

He is very keen on defence stocks. (Owns United Technologies (UTX-N).) There are others he would buy on weakness such as Orbital ATK (OA-N), a long-term play on munitions and the propulsion area. Also, Huntington (HII-N), which does most of the work for the U.S. Navy.

A US defence name? Some of the best companies in the US are in this area. His particular favourite is this one. Really a tech stock in disguise. People think they are just focused on providing US armaments to the US government, but it is far more than that. They are supplying armaments to overseas governments, and have a significant private sector business as well with high-tech, aviation, etc. However, he would be cautious at the current valuation.

A good defence stock? He would caution on rushing in to buy an industry just because a political party says they are going to increase defence spending. Generally speaking, it seems to be a disconnect between what they say and what they actually do. However, defence stocks are not terribly expensive if you look at the free cash flow yield. Lockheed Martin (LMT-N) is his favourite because it is the most profitable and diversified. He has looked at Boeing (BA-N) which is very profitable. Lockheed Martin would be his 1^st choice, and Boeing would be 2^nd.