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Staying Power: Defense

Tuesday, 4 Dec 2007 | 7:23 PM ET

One of the themes of Mad Money, as most Home Gamers know, is to find an investment thesis that will work for years and stick with it. Bull markets that are built on fundamentals instead of hype can usually be counted on for long-term investments, Cramer said. So on Tuesday’s Mad Money, he highlighted the aerospace and defense complex as one of those long-term plays. And the stock to buy within that group, as far as he is concerned, is Raytheon.

Bull By The Horns
Defense stocks are the ultimate defense against a potential recession, with Mad Money host Jim Cramer.

Even pacifists need a defense contractor in their portfolios, Cramer said. The U.S. has become the arms merchant to the world and that shouldn’t change no matter what happens in the White House next year.

U.S. defense stocks are a play on both the Republicans, who love to spend money on the military, and Democrats, who desperately want to look tough, according to Cramer. Better yet, these companies are generally impervious to a slowing economy and they all have visibility thanks to the big, long-term government contracts they receive.

So why Raytheon ? For starters, it has the best balance sheet of the group after it sold off a lot of its unpredictable businesses. Also, as evidenced by last quarter when it gave low-ball guidance that it should easily beat, the company has clearly mastered the expectations game. In fact, it might even know it too well. The stock took a big hit last time it low-balled and still hasn’t recovered.

Raytheon also speaks to those magic Mad Money words: “rest of world.” The company has huge international business and even more opportunities to grow as nations in the Middle East and Asia ramp up their defense spending.

And it’s a stealth play on the hot-button issue of immigration. If the U.S. goes forward with plans for a virtual border fence with high-tech sensors, Raythoen is the company that will likely make it since it already has border contracts in other countries like the U.K. If it got tapped to it do it here, Cramer thinks the stock could catch a quick seven or eight points.

All that and a $2 billion buyback.

The bottom line? Long-term bull markets are where the money is, Cramer said. Defense is one of them, and Raytheon is his play.

>Click to read the read about the long-term bull market in oil


Jim's charitable trust owns Raytheon.

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

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