Profit Pregame

Weak Outlooks from Top Defense Firms Make Investors Nervous

Depressed aircraft sales caused by COVID-19 are creating some turbulence in the defense industry.

What’s happening?

Yesterday saw earnings reports released from two of the world’s largest defense contractors, Lockheed Martin Corporation (LMT) and Raytheon Technologies Corporation (RTX).

Wall Street looked to these reports for the latest indication of the strength of the defense industry.

And the results were fairly mixed…

Raytheon stock opened up strongly on a solid EPS beat, while Lockheed shares were punished for missing earnings expectations.

What the two reports had in common was shaky forward guidance on aircraft and aerospace equipment sales. Lower than expected sales forecasts paint an uncertain picture of the future for the two aerospace giants.

But despite the concerns, there still a good case for strong performance in the defense industry…

Where’s the money?

It’s no secret that the main driver of revenue for Lockheed is its F-35 fighter jet. – and Lockheed stated that F-35 deliveries that were delayed due to COVID-19 likely won’t be fully back on track until the end of the year.

But the F-35 remains extremely popular and should continue to see high demand as the U.S. and its allies recover from the pandemic.

Meanwhile, Raytheon is looking ahead to its own set of issues. Raytheon is a major supplier of jet engines to Boeing, and the collapse of air travel demand coupled with the 737 Max have hit that arm of RTX hard.

But again, demand for those products is almost guaranteed to rebound as things get back to normal.

And smart investors will use the uncertainty created now to profit in the future.

How do I get some?

Look, the defense industry is about as safe a bet as one can make. The U.S. spends more on defense than every other country – combined.

And I don’t see that stopping any time soon, even under the new administration. In fact, the massive infrastructure spending that we’re expecting to see over the next few years will likely be a boon for these defense stocks.

I’m actually already seeing a slew of buyers on the RTX March 19, 2021 $75 Calls (RTX210319C00075000) in S.C.A.N. If you can get them for under $1.25, I really like the trade.

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In the Spotlight: A New Frontier in Cannabis Products

Canopy Growth Corporation (CGC), the world’s largest cannabis company, surged more than 7% by mid-day yesterday.

Canopy announced a brand new line of CBD chews and oil drops for pets – and Martha Stewart will reportedly be the face of the brand. The collaboration with Stewart gives CGC a big-name endorsement and visibility while simultaneously offering new products to consumers.

Perhaps the most intriguing thing about the cannabis industry is that we’ve likely just barely scratched the surface on the array of products the industry can offer.

I’ll be rolling out some of the most interesting and profitable investment ideas right here at Profit Pregame as the industry continues to evolve.

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