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VSEC - A Stock of Interest

|Includes: VSE Corporation (VSEC)

VSE Corp. will likely benefit from either a military confrontation soon between Iran and Israel or from an ensuing regional arms race if Iran is allowed to become a nuclear menace. They stand to be an up stock in a down market if war breaks out. This is how the stock behaved at the last Middle East war:

It was resilient in the 9/11 sell off and soon began reacting to the impending Iraq war with a strong climb against a market sell off following Bush's announcement of the coming invasion "at a time of our choosing".

VSE offers "brains-of-the-operation" support such as electronic warfare software support. If there is no Iran/Israel war, we will enter into what Hillary Clinton has phrased in a recent speech as a "defense umbrella" relationship with allies in the region near Iran, offering missile systems and American technology. This is what the recent retargeting of American missile strategy in the area is all about. VSE already sells into this market. They revamp old U.S. warships for use in foreign navies.

This is a gem of a stock even with no hot or cold war help. Price/sales is 0.2 and price/cash flow from operations is 7.3 and running a current PE around 10. This is good valuation for what Morningstar terms "aggressive growth" in their "stock type" classes. Looking at their results over the last 10 years, I would term it "ballistic". Obama's defense cutback promises have probably placed the stock on sale. But, like most political promises, this one may have to be severely compromised. And the defense budgets of Iran's neighborhood may not be so frugal.

Disclosures: Long VSEC