Unless you’ve been living under a rock or refuse to change the channel from Game of Thrones re-runs, you’re likely aware of the recent transgressions on behalf of Kim Jong Un and North Korea. Global markets traded markedly lower after President Trump’s comments in retaliation to the arming of North Korean patrol ships and discovery of missile-ready nuclear warheads that can reach the US. On the brink of imminent military conflict, markets are reflecting the risks associated and investors are liquidating stocks. Some hedge fund managers have even placed bets against the S&P, purchasing puts and selling calls.
Before you go frantically dialing your broker or smashing the sell button, consider hedging your portfolio by purchasing options on the overall indices or investing in major defense contractors. I suggest strongly considering Lockheed Martin ($LMT) and Raytheon ($RTN). Lockheed traded higher today to $305.19 per share (as of writing.) The aerospace and defense contractor is now up nearly 20% YTD and over 200% in the past 5 years. Given the current global political climate, an attractive dividend yield of 2.45%, and a fair PE ratio of 17.66, this stock will generate considerable returns in the near and long term.
Shares of Raytheon also traded higher today, tacking on gains of 2.57% on the day and nearly 25% YTD. The aerospace and defense contractor, similar to Lockheed, offers an attractive dividend yield of nearly 2%, a PE ratio of 23.10, and should produce favorable returns for years to come.
Disclosure: At the time of writing, I maintain holdings in both Lockheed and Raytheon, and plan to continue to hold for the foreseeable future.