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Stock Of The Week
America's Military Machine At A Discount NEW YORK - Bill Meridian, editor of Cycles Research, recommends buying shares of Bethesda, Md.-based Lockheed Martin, the U.S.'s largest defense contractor. The company earned $1.1 billion in the past 12 months on sales of $33.1 billion and generated $1.6 billion in free cash flow. Higher sales of combat aircraft in the first quarter of 2004 drove sales 18% higher to $8.35 billion, and net income of $291 million was up 16% compared with results from first-quarter 2003. At the end of 2003, Lockheed Martin reported an order backlog of $76.9 billion.
Special offer: In 2003, Forbes bond guru Richard Lehmann delivered 47% in total return to investors in his highest-yielding model portfolio. To find out which preferred stocks and convertibles he is recommending today, click here.Meridian, an American money manager and market timer, operated a fund in Abu Dhabi for 14 years until moving earlier this year to Vienna, where he manages money for private accounts. His recommendation of LMT is based on technical analysis."Daily oscillators have been making higher lows since March. The weeklies have been doing likewise since late 2002, and the monthly oscillator has done so since 2000," Meridian observes. He adds that LMT is in a strong industry group and that its relative strength versus the S&P 500 turned up in March, reversing an 18-month downtrend, during which it retraced 50% of its 2000-2003 gain. Meridian also notes that the seasonal pattern for LMT is favorable: "On an annual basis, LMT has risen between July 20 and Oct. 5 about 75% of the time." LMT generates 62% of its sales from the U.S. Department of Defense and 16% from homeland security projects. International work accounts for 18% of sales, and about 6% comes from commercial satellite and launch services. It competes with Northrop Grumman (nyse: NOC - news - people ) and Boeing (nyse: BA - news - people ) for big-ticket Pentagon systems and support services. The international work is sometimes done in dangerous places. On June 12, Lockheed Martin employees had one of their co-workers working on Apache helicopters kidnapped by terrorists in Saudi Arabia. American engineer Paul Johnson's abduction underscores the imminent danger facing American workers stationed in global hot spots. Employees at Halliburton (nyse: HAL - news - people ) are all too familiar with comrades killed, captured or injured in the line of corporate duty. Special offer: Jim Stack of InvesTech Research looks at macroeconomic trends and market internals from a historical perspective to create profitable portfolio strategies. Click here to learn more about Stack’s Japanese investments, as well as U.S. stocks poised for growth, even as interest rates rise.Lockheed continues to expand its line of offerings to the Pentagon. Two weeks ago, shareholders of Titan (nyse: TTN - news - people ) accepted LMT's reduced $2.2 billion buyout of the San Diego computer systems and spy equipment contractor. LMT can still back out of the deal, pending the outcome of U.S. Securities and Exchange Commission and Justice Department investigations into alleged overseas bribery. Titan has more than 4,000 employees providing translation services for the Army in Iraq and recently fired one translator who admitted being present during prisoner abuse at Abu Ghraib prison.With LMT's favorable reward-risk ratio of 3-to-1, Meridian's price target is $60. Support is at $48. Meridian, who is consistently ranked as a top market timer by Timer Digest (with a 36% gain during the bear market in 2002), advises taking profits in late August. September, he believes, will be true to form as the year's worst month for stocks, although the subsequent rally, he says, should run through December.  Click here to watch a video with more information about Lockheed Martin.
The investment above is being recommended in Cycles Research. For updates and more in-depth analysis from Bill Meridian, visit http://www.billmeridian.com. The investment above was recently recommended in Forbes Newsletters' free Stock of the Week e-mail. To receive Stock of the Week next Monday, click here. Send comments and questions to investingnewsletters@forbes.net.
Atmos Energy To Buy TXU Unit For $1.9B - 6/17/04 1:03:05 PM ET Atmos said the acquisition creates a gas utility with 3.1 million customers in 12 states. Jobless Claims Dip, Wholesale Prices Up - 6/17/04 8:41:02 AM ET The number of new people signing up for jobless benefits dropped last week, while wholesale prices rose sharply in May. Ford Raises Guidance Again - 6/16/04 6:14:06 PM ET Lifts Q2 earnings guidance by 15 cents per share from continuing operations, excluding special items. U.S. Indicators Up More Than Expected - 6/17/04 12:51:05 PM ET Update 3: Leading Indicators Up More Than Expected HSBC To Lay Off 3,500 Workers - 6/17/04 12:08:04 PM ET HSBC to Lay Off 3,500 of Its Workers Subscriptions >
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