Defense Industry Poised to Profit from Soaring Defense Budgets in the U.S. and Middle East, Forecasts MoneyandMarkets.com Analyst John Burke in New Report
Iran Likely to Ignore UN's August 22 Deadline, Deploy "Oil Weapon"
JUPITER, FL., August 15, 2006 - As new terror threats on airlines, armed conflicts in the Middle East, the showdown over Iran's nuclear ambitions, and the North Korean missile crisis heat up world tensions, several defense-related stock prices are poised to move sharply higher, according to a new report by MoneyandMarkets.com investment analyst John Burke.
"While spreading geopolitical strife does not bode well for the broad market, it is greatly boosting demand for both conventional and anti-terrorist military hardware and technology," writes John Burke, a former marine intelligence analyst. "Since 2000, the US defense expenditures have soared 82% to an estimated $536 billion in 2006. That's an increase (as a percentage of GDP) from 3% to 4.1% of GDP. In fact, U.S. defense spending exceeds that of the rest of the world combined, despite significant arms buildups in the Middle East and Asian - which total over $4 billion in military equipment sales."
In his just-publisher report, "The Rising Tide of War: Five Defense Stocks with The Best Prospects," Burke reviews the most critical threats to global security - the conflict between Israel and Hezbollah, the showdown with Iran, North Korea's nuclear ambitions, and the Iraqi civil war, while pointing out the defense build-ups likely from each:
* Iran is likely to ignore the UN's August 22, 2006 deadline to suspend its uranium enrichment program. Moreover, in response to threats of sanctions, Iran could play the "oil card" or even take steps toward carrying carry out its threats to block the Strait of Hormuz, potentially cutting off up to one-third of the world's energy supply. This threat is bound to boost demand for weapons systems both in the region and in the U.S.
* Although a day-old ceasefire between Israeli Defense Forces and Hezbollah exists in Southern Lebanon and the Gaza Strip, at any moment Middle East tensions could explode into a regional conflict, drawing in Syria, Iran, and even other energy-producing Arab states. Demand for military supplies, already rising, could skyrocket.
* The spreading Shiite-Sunni conflict in the Muslim world is likely to boost weapon build-ups by Sunni-dominated governments fearful of Shiite rebellions.
* North Korea's recent missile tests are further stimulating on-going demands for military build-ups in China and Japan.
* The Iraqi civil war is unlikely to result in a U.S. pull-out. Instead, due to the West's heavy reliance on Persian Gulf oil, the U.S. and its allies are expected to make even deeper military commitments to the region.
The report seeks to uncover defense industry winners. "Even while broad market averages have fallen, the share prices of defense-industry heavy hitters have soared," says Burke. In his report, Burke points to seven year-to-date examples:
United Technologies (UTX), up 11%;
Northrop Grumman (NOC), up 12%;
Raytheon (RTN) and Boeing Co. (BA) up 16%;
Rockwell Collins Inc. (COL), up 18%;
General Dynamics (GD), up 21%; and
Lockheed Martin Corp. (LMT) up 25%.
For a summary of the report, click here.