Iran, North Korea: Investing in the Axis of Defense

By Tom Henderson, Strategist JBH Capital.

The world is closely watching events in both Iran and North Korea. Iran is a focus of attention following large-scale protests from some of its own citizens after a questionable presidential election. North Korea is a focus following its recent missile tests, belligerent rhetoric including threats to Hawaii, and reported internal power struggle as the father and son Ill brain trust square off against other hardliners. With Iran intending to further its nuclear capability for ‘energy’ purposes regardless of the outcome of its election, and North Korea furthering its nuclear weapons capability as each day passes, the US will need to prepare for the ‘what-if’ scenarios.

I am sure that top game theorists are being consulted by the US intelligence to try to figure what Iran and North Korea tend to do next. As a market participant, it is smart to be prepared no matter what happens. There are ways to potentially profit from these ‘what-if’ scenarios created by Iran and North Korea. Thwarting an attack before it causes damage to the US or its allies would be critical, so strong defensive measures would be paramount. To do this, the old Star Wars system or ‘missile defense shield’ in current parlance comes to mind.

There are four large capitalization companies in the interceptor missile and missile defense group. These are Raytheon (RTN), Lockheed Martin (LMT), Orbital Sciences (ORB), and Northrop Grumman (NOC). I have put key metrics for these defense companies below but will leave it up to the reader to further delve into these names and decide which may be ripe for a move higher.

Symbol	Price	Market cap	Revenues	Price / Revs	Rev Growth %
		($ billion)	($ billion)
RTN	45.33	17.86	23.70	0.75	9.90%
LMT	81.66	31.74	43.12	0.74	3.90%
ORB	16.14	0.911	1.18	0.77	4.30%
NOC	46.69	15.10	34.48	0.44	7.70%

Symbol	EBITDA	Price / EBITDA	TTM Earnings	Price / Earnings
	($ billion)		($ billion)
RTN	3.02	5.91	1.72	10.38
LMT	5.48	5.79	3.15	10.08
ORB	0.095	9.59	0.04	22.78
NOC	3.88	3.89	-	-

Symbol	Cash	Debt	Net cash	Insider
	($ billion)	($ billion)	($ billion)	Buying?
RTN	2.21	2.30	-0.09	no
LMT	2.44	3.81	-1.37	no
ORB	0.324	0.12	0.21	no
NOC	0.923	3.94	-3.02	yes

There are no disclosures to make.