00:00 Brian Sozzi

Northrop Grumman, Lockheed Martin catching bids here, as you would imagine after a situation like this. I didn't realize this, Julie, but Northrop Grumman gets about two percent of its sales or 500 million dollars from the B2 alone. Um, you know, what, you know, how long do you think this trade like legs this trade could have or or peters out after the news disappears?

00:21 Julie Hyman

I mean, even the moves that we're seeing today are pretty muted in the big defense stocks, right? We're not really seeing moves of more than a percent across the board. Boeing, which makes the so-called bunker buster bombs, um, last I checked was actually moving lower. You see RTX is moving lower. So it doesn't feel like there is necessarily an immediate reaction here. That said, many of these stocks have rallied big already this year. So there already has been something of a pricing in of an increase in geopolitical conflict and the effect that that's going to have on these stocks. The other thing to keep in mind is even if you have an uptick in this kind of conflict, um, despite the best efforts of say Doge, for example, the federal government, including the military industrial complex, is still a large, slow-moving organism. So something like this happens, do you see the government coming out and then like putting in other orders immediately? Um, I think that remains to be seen and so yes, we're seeing some of these stocks up a lot. There was an interesting note from Jeffries this morning that you actually flagged to me that pointed out the companies that have the biggest exposure to that region of the world where the conflict is having. There's a company ticker ESLT, which according to Jeffries has 29% of its sales to Israel. So there you could see more of a direct effect than maybe some of the largest US defense contractors.

02:18 Brian Sozzi

Truly, I appreciate all praise. You know, so keep it coming throughout the show. That's why we have you here on the ensemble. Chad, in terms of defense stocks, how much your portfolio if this is going to be a summer of geopolitical risks, geopolitical risks, how much of your portfolio should be allocated to defense names?

02:41 Chad Morganlander

So Brian, for full disclosure, we own Lockheed Martin in our Rising Dividend portfolio at Washington Crossing Advisors. We've owned it for at least three years and we expect over the next three to five years that revenues will continue to grow. We own roughly about four percent to three and a half percent position in that in our portfolio.

03:07 Brian Sozzi

Chad, real quick, Chad, real quick, why why Lockheed over Northrop?

03:17 Chad Morganlander

Uh although Northrop is a wonderful company and it's growing profitable, well capitalized, we thought from the valuation perspective that Lockheed was more attractive. It's sitting at a 2026 multiple of roughly 15 times. It has not had the big multiple expansion like their competitors. We believe that there's a seam of opportunity as there's been an overhang of uncertainty regarding the F uh the F-16 or the F-24 fighter jets. I mean, that to us is one that we believe has that seam of opportunity and we want to take advantage of it over the long run.

04:13 Brian Sozzi

Tim, last word to you on this topic. You're our ETF guy on the panel. Are there more clever ways to play the defense trade besides going to our platform, typing in the tickers like Lockheed Martin, Northrop Grumman?

04:28 Tim Seymour

Well, Brian, I think, you know, using an ETF like a PPA that gets you broad exposure probably makes a lot of sense here, especially when you think about this reconciliation bill that's coming out. You're looking at additional $150 billion in defense spending. You pair that with looking at this conflict, uh what's going on in Russia, Ukraine, defense spending is not going down, it's not going down in the US, it's not going down globally. Uh and there are going to be winners and losers based on that, based on who wins the contracts. So we think using an ETF, uh getting that broad base exposure really helps you capitalize on the mega trend uh that we see taking place over the next year, two, three, four or five years.