As the conflict between Iran and Israel escalates, several defense stocks that have grown in popularity among United States Congress members are reacting positively, posting notable gains.
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The stocks are surging partly due to their crucial role in providing military technology to the U.S. and its allies. The surge in geopolitical conflict in the Middle East has further amplified the potential demand for products these companies offer.
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Amid the market performance, attention has turned to the timing of purchases by several Congress members. The politicians have invested in companies like Lockheed Martin (NYSE: LMT), Raytheon (NYSE: RTX), and Northrop Grumman (NYSE: NOC), sparking debates about conflicts of interest as lawmakers influence defense budgets while holding significant investments in these companies. Below is how the equities are performing amid the geopolitical conflict.
Lockheed Martin (NYSE: LMT)
The share price of Lockheed Martin ended the latest trading session on October 1 at a new record high of $605, gaining over 3.6% for the day. Indeed, in recent months, LMT has been on an upward trajectory, recording returns of about 32% in 2024 alone.
These gains have been rewarding for several politicians, such as Representative Kevin Hern, who made his purchase on June 15. His investment in LMT has gained by almost 30%. He purchased $1,001 and $15,000.
Other politicians in the green on their LMT purchases include Representative Jared Moskowitz (29%) and Kathy Manning (37%). In addition to the politicians, LMT is also witnessing increased interest from institutional investors, with hedge funds taking center stage.
For example, Regal Investment Advisors increased its investment in Lockheed Martin by over 100% in the second quarter of 2024. During the same period, Wulff Hansen & CO. increased its stake by 56,626.7%.
The interest in LMT comes at a time when the company was awarded a $5 billion contract from the U.S. Army to produce and maintain essential military and defense equipment. This mega award cemented Lockheed Martin’s position as the United States’ largest defense contractor.
Besides the impact of escalating regional tensions, LMT has traded in line with analysts’ estimations after the company reported better-than-expected results for the second quarter. Earnings per share (EPS) of $7.11 beat Wall Street estimates by 10%, while revenues surged 6% to $18.1 billion.
Analysts at RBC Capital Markets set a price target of $600 in a note on August 5, and Deutsche Bank shared a similar target on July 26. Additionally, artificial intelligence (AI) tools predict LMT trading at $625 by the end of 2024.
Raytheon (NYSE: RTX)
The share price of aerospace and defense conglomerate Raytheon also peaked at a new all-time high, trading at $124 as of press time. The equity has sustained momentum from early in the year, surging by over 45% in 2024 amid an influx of notable fundamental elements.
Similarly, the gains have also benefited several politicians. Following a buy between $1,001 and $15,000 in July, Rep. Hern has seen his investment surge by 18%. Senator Markwayne Mullin is also up 76% from his October 2023 purchase, while Representative Dan Newhouse, who made his last investment in April, has gained 22%.
Finbold initially reported that RTX is among the favorite U.S. stocks preferred by Congress members, with many being part of defense boards.
Raytheon is also supported by key fundamentals stemming from government contracts. For instance, the company secured a $525 million contract from the U.S. Navy for Evolved SeaSparrow Missile Block 2 and spares. According to the firm, the ESSM Block 2 missiles will help boost the flexibility and capability of the U.S. and allied nations’ navies.
Northrop Grumman (NYSE: NOC)
Although Northrop Grumman didn’t hit a new all-time high, the defense stocks momentum helped the equity rise to its highest point since 2022. By press time, NOC was valued at $543, rising almost 3% in the 24 hours, while in 2024, the equity is up 15%.
Notably, Representative Josh Gottheimer, who bought Northrop Grumman stock in July, is up 25% on his purchase.
Separately, the company has also been active in securing several deals likely to bolster investor interest in the equity. For instance, the U.S. Missile Defense Agency tapped Northrop Grumman to develop the Glide Phase Interceptor, a system designed to neutralize hypersonic missile threats.
The firm partnered with the Lithuanian government to support the production of medium-caliber ammunition for Infantry Fighting Vehicles.
In conclusion, the ongoing geopolitical tensions have significantly boosted the performance of key defense stocks, rewarding institutional investors and several U.S. Congress members who strategically invested in these companies.
While the surge in demand for defense technologies supports the upward momentum, investors need to consider analysts’ cautiously optimistic outlook.
