War with Iran is quickly becoming the talk of the nation. Sanctions have driven the Iranian currency into freefall and it looks as though something will happen in the middle east to spark a brand new war with the Islamic nation. While I personally feel that talking things out almost always beats a fist fight, as an investment advisor I have to point out stocks to clients that I think will rise because of the current macro economic picture. Right now, we face rising oil prices and a hike in defense spending if a war with Iran is on the table (and I sure hope it doesn't come down to that!). The following 3 stocks look well positioned to grow earnings in a war-time environment. One thing is certain, if Iran decides to take offensive tactical actions against the U.S., war is the obvious outcome.
Halliburton (HAL) -- Halliburton is one of the companies historically that has benefited handsomely from fighting wars in the middle east. Shares of the company are as cheap as I have ever seen them at 12X trailing earnings and 8X forward earnings estimates. Halliburton's 25% return on equity, 11% net profit margins, and 40% growth rate over the past year makes the stock attractive in an environment of rising oil and gasoline prices. Drilling services, well components, cementing, sand control systems, etc... are all going to be in greater demand if oil and gas prices rise further because America will be scrambling to open up domestic sources of energy supply.
Petrobras (PBR) -- Brazil's Petrobras is one of the biggest beneficiaries from higher oil prices thanks to the recent deal with the Brazilian government to increase offshore oil reserves. Petrobras is cheap here at 8.9X forward earnings though it's not as cheap as some of the other names that could benefit from higher oil prices. That said, with a huge increase in long term reserves, PBR is well positioned to grow earnings into the distant future.
General Dynamics (GD) -- One of the most diversified US defense companies, General Dynamics, would benefit from a new war in the Middle East because the company sells all kinds of defense equipment from munitions, combat vehicles, aerospace units, firearms, etc... If you want to make the arms needed to blow up Iran, GD is one of the best recipients of wartime spending.
While I am very much in the peace camp (with Ron Paul on this one), I recognize the situation is rapidly deteriorating into a very sad endgame.