Northrop Grumman Corp (NOC)

If NOC gets back down around $71 as it did earlier this month for about 15 minutes, it is a serious buy. Price target by 2010 = $105 based on $7 earnings/share...offers 40-50% margin of safety.

Military spending is a positive and strong balance sheets make it a safe bet for the bumpy ride.

fabulous stock. buy it while it's down. remember: a stock's value is unrelated to the company's health. It really depends on what is in fashion for the big buyers ( individual and funds). defense stocks may be out of favor right now, but if i could, i'd buy into this one

Good value with a nice dividend. Weapons will never go out of style.

The need for high tech defense systems is bound to increase, regardless of who is in power. It may be a sad commentary, but if our history tells us anything, it is that war will never be far off. Adding a DOD contractor with decent fundamentals to one's portfolio is likely a profitable long-term move.

These guys are the good guys of defense contractors. I'm speaking with a little bit of inside knowledge here having been involved in the defense industry in the past (no longer). I've worked with contractors from various organizations. You only need to read the news to know that Boeing has a culture of corruption and waste. Northrup people are different, they take ethics and quality seriously and it's not just a bunch of slogans and PR. I wanted to buy a small position in the weakness in defense stocks today but I won't go anywhere near Boeing.

Part of a basket of Defense Contractors, the industry is going to do very well.

1. Second largest defense company in U.S.:
-125,000 employees
-Strong/vast infrastructure
(Yahoo! Finance Company Profile)

2. Strong position in market:
-Largest IT services provider to U.S. government
-Only nuclear-powered aircraft builder
-Largest contractor to U.S. Navy
-Difficult for new competitors to enter market
(Business Source Premier)

3. Broad industry exposure:
-NG has seven business divisions:
Electronics
Ships
Integrated systems
Mission systems
Information technology
Space technology
‘Defense Other’
(10K/Annual Report)
-With such varied revenue generating segmentation, a decrease in one segment can be compensated by gains in another.

4. Government Contracts:
-Reliable contracts, not easy for government to jump ship because of the nature of the contracts (often highly secret)
-Established relationship with government
-Government willing to pay for defense systems and is capable of taking on huge debt
(Hoovers)

5. Strong revenue growth:
-NG has seen strong growth in important “key” business sectors
-Solid and increasing stock price (owner/investor satisfaction)
(10K)

6. Steady cash flow:
-Currently has about 1 billion in cash
-Cash on hand for future growth/low cost of capital
(10K)

7. Lower debt than competition:
-Long term debt: $3.9 billion
-Short term debt: $170 million
-Lockheed:
-Long term debt: $4.7 billion
-Short term debt: $202 million

8. Product line:
-Few substitutes
-Inelastic demand
(Hoovers)

Iran is developing nuclear weapons and plans to deploy them with ballistic missiles. It is funding and arming both Hamas and Hezbollah. Iran's strategy is to increase its leverage over the US by developing a variety of threats to Israel. When the US finally talks to Iran this is what the US will hear: "We (Iran) can help you in the middle east by reigning in Hamas and Hezbollah and stopping short of fabricating a nuclear warhead. In return we (Iran) want lifting of sanctions, a credible promise that the US will not attack or invade Iran, and international acceptance."

Northrop Grumman is a world leader in high powered laser weapons. It has demonstrated an Airborne Laser (ABL) powerful enough to destroy ballistic missiles in the air. The ABL can be deployed in a 747. This is a major advance. The amount of energy needed to power the laser has to be generated inside the 747. That has been demonstrated. The laser has to be powerful enough to disable an airborne ballistic missile. This has been demonstrated. In 2009 the ABL is to be test fired in flight against a US ballistic missile. If it becomes operational US Air force 747's equipped with ABL's would fly close to Iran. Satellites would detect a missile launch and the ABL would lock onto the missiles heat signature as it lifts of the ground. The laser would heat and deform the missile's "skin". This would cause the missile to disintegrate from the stresses of rapid flight. Missiles start off very slowly making them much easier to intercept at launch.

Northrop Grumman can probably neutralize Iran's nuclear threat. NOC has also developed a lesser powered laser weapon system that intercepts and destroys incoming ordnance such as artillery shells, mortar rounds, and short range rockets. The system works. It has been demonstrated on a number of occasions. This system will render Hamas and Hezbollah incapable of striking Israel from within Lebanon or a nascent Palestinian state.

Given the challenges faced in establishing peace in the middle east I think NOC has developed the capability to change the rules. Since President Obama is planning to put a lot of effort into establishing an end to the arab-Israeli conflict I expect NOC's laser weapons will be in great demand.

NOC is also home to a lot of nuclear technology. All future US Navy ships will be nuclear powered and NOC will build all or most of them. It developed its expertise building nuclear powered submarines. Recently Northrup demonstrated a remarkably advance in the amount of power that can be produced with an electrical motor. Working with American Superconductor they created a motor with coils made of high temperature superconducting (HTS) "wires" that generated 49,000 horsepower -double the Navy's previous power rating test record.

"Incorporating coils of HTS wire that are able to carry 150 times the power of similar-sized copper wire, the motor is less than half the size of conventional motors used on the first two DDG-1000 hulls and will reduce ship weight by nearly 200 metric tons. It will help make new ships more fuel-efficient and free up space for additional warfighting capability.

This system was designed and built under a contract from the Office of Naval Research to demonstrate the efficacy of HTS motors as the primary propulsion technology for future Navy all-electric ships and submarines. Naval Sea Systems Command (NAVSEA) funded and led the successful testing of the motor.

AMSC and Northrop Grumman shared the work under a formal business agreement, with AMSC serving as the prime contractor for the research and development phase.

The Navy has invested more than $100 million in the development of HTS technology, paving the way not only for use in Navy ships but also in commercial vessels, such as cruise liners and liquefied natural gas (LNG) tankers, which can also take advantage of the space and efficiency benefits of HTS motors."

This technology will reduce the future cost of powering large commercial vessels after the recession ends and oil prices rise again.

Northrop Grumman is partnered with Areva -the French nuclear power plant designer/builder, to produce third generation nuclear power plants in the US. It had been assumed that GE would kit out any new US nuclear power plants and Warren Buffet's MidAmerican group was set to buy the Constellation Energy Group -a major US utility that operates nuclear reactors. On Christmas eve it was announced that Areva's owner, Electricite de France (EDF) had outbid MidAmerican to acquire 49.99% of Constellation for $4.5 billion -including $1 billion in cash to strengthen the balance sheet and maintain the liquidity currently needed by Constellation. MidAmerican will receive a $175 million contract termination fee.

EDF/Constellation plans to build new nuclear facilities in the US. EDF also gains some control over Constellation's three existing nuclear facilities.

France is the world's leader in nuclear power production. The US Nuclear Regulatory Commission did not receive a single application for a new nuclear power plant in the 30 years preceding 2007. Since then 23 applications to build over 30 new reactors are in process.

EDF/Areva/Northrup Grumman are in position to be major players in the expansion of nuclear power generation capacity in the US.

Northrop Grumman appears to be in the right place at the right time.

Nuclear tests confirmed by Pyongyang. Let the proliferation begin.

Uncertainty about future developments with North Korea, China,Iran, Syria, Russia and Iraq makes it a prudent move to own blue chip defense stocks. The U S congress be it Democratic or Republican dominated must maintain a strong Defense program to counter this array of threats real or imagined. This means not only funding continuation but funding increases in selected area especially missile defense and early warning systems. NOC is heavily involved in all of these areas.

NOC will increase its stake in Scaled Composites from 40% to 100%. Scaled Composites won the $10 million Ansari X Prize in 2004 when SpaceShipOne made two spaceflights in a two week period. This is Burt Rutan's aerospace design company which joined Sir Richard Branson's Virgin Galactic to form a new company called The Spaceship Company, to design and test commercial passenger space craft. Northrop Grumman has the experience and capabilities to build commercial spacecraft on a grand scale. IMHO, one doesn't need to be a rocket scientist to see where this combination is going.

Does not look defense spending will be going down in the near future.

This is a solid company in the aerospace and defense industry. I predict with the increase of oil and fuel that the nuclear program for naval vessels will increase dramatically over the next ten years. Considering this company is only one of two companies capable of this I expect very large jumps. Also it is among the top three in defense contracts as a multi billion dollar company. This is a solid pick. I also feel that as they make more and more cuts in their over head budget that this will also increase the cut to the stock holder therefore making this a valuable stock to have in your portfolio.

war is sexy.

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Cramer Pick

TDRH

In rough seas you can depend on the Industrial Military Complex to make money.  A slow economy has never slowed down the spending of big government.