With the looming threat of a military intervention in Syria, investors are focusing more intensely on defense related stocks. Given the expectations of a quick, tactical strike, the most attention is being paid to those companies who specialize in longer-range weapons and ordnance, like the cruise missile.
Cruise missiles have been used by the U.S. military in every major campaign going back to Operation Desert Storm in 1991. One name has become synonymous with the weapon: Raytheon's Tomahawk.
U.S. Navy documents suggest that each Tomahawk would cost about $1.6 million. (The Navy orders about 196 of the missiles a year).
Raytheon shares have performed well so far in 2013, having gained nearly 30%. That handily beats the 15% return of the S&P 500 during that same time span. That strong move to the upside is one of the big reasons why earlier this week, analysts at Stifel Nicolaus downgraded the stock to "hold" on valuation.
Bank of America Merrill Lynch Analyst Ron Epstein said this week that Raytheon was particularly sensitive to Syria headlines — even though the Tomahawk only accounts of 1% of its total sales,investors may play near-term thematic trades given the ongoing situation.
The run-up in valuation isn't unique to Raytheon, though. Other companies in the industry have also performed well. General Dynamics has narrowly outperformed the broader S&P 500, up 16%. Their Electric Boat unit makes a variety of attack submarines.
Then, there's United Technologies, whose Sikorsky Aircraft unit makes Blackhawk helicopters. Those shares have risen by 19% this year. Shares of Boeing and Lockheed Martin are both up over 30% during that same time frame.
The question then becomes whether many of these stocks have already had their near term upside priced in, or if there could be more upside momentum depending on the catalyst.
Read on for more on the defense contractors whose products could be used in the coming days in the Middle East.
—By Dominic Chu and Mark Richards
Follow Dom at @TheDomino