In addition to the ongoing conflict between Russia and Ukraine, the market is now accounting for the risk related to the Israel-Hamas war that escalated over the weekend.
Although the three major indexes all rose on Tuesday, billionaire investor Paul Tudor Jones (Trades, Portfolio) said during a CNBC “Squawk Box” interview that it is tough to be invested in risk assets currently.
“It’s a really challenging time to want to be an equity investor and in U.S. stocks right now,” Jones said. “You’ve got the geopolitical uncertainty... the United States is probably in its weakest fiscal position since certainly World War II with debt-to-GDP at 122%.”
The founder and chief investment officer of Tudor Investment added the conflict has brought on the most threatening geopolitical environment, which could create a significant risk-off market environment. As such, Jones said he will wait for a resolution to be reached and evaluate the potential impacts before jumping into risk assets again.
With the heightened geopolitical tension around the world, the industrials sector is up 6.36% year to date. Within the sector, the aerospace and defense industry has recorded a 10.70% increase over the same period.
While a peaceful resolution is, of course, the universally desired outcome, defense spending is unfortunately still considered a necessity for many governments around the world. The GuruFocus Aggregated Portfolio, a Premium feature based on 13F filings as of the end of the second quarter, found aerospace and defense companies that are broadly held by gurus include RTX Corp. (RTX, Financial), Lockheed Martin Corp. (LMT, Financial), General Dynamics Corp. (GD, Financial), Boeing Co. (BA, Financial) and L3Harris Technologies Inc. (LHX, Financial).
Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
RTX
With a combined equity portfolio weight of 6.39%, 19 gurus are invested in RTX (RTX, Financial).
The Arlington, Virginia-based company formerly known as Raytheon Technologies, which manufactures missiles, aircraft engines, military communications technology and related products, has a $107 billion market cap; its shares were trading around $73.52 on Tuesday with a price-earnings ratio of 19.50, a price-book ratio of 1.48 and a price-sales ratio of 1.54.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 75 out of 100, the GF Score indicates the company is likely to have average performance going forward. While it received high ratings for profitability and value, the financial strength and momentum ranks are more moderate and growth is low.
Of the gurus invested in RTX, Dodge & Cox has the largest stake with 2.24% of its outstanding shares. Ken Fisher (Trades, Portfolio), Hotchkis & Wiley and Barrow, Hanley, Mewhinney & Strauss also have notable holdings.
Lockheed Martin
Eighteen gurus have positions in Lockheed Martin (LMT, Financial), representing a combined equity portfolio weight of 5.51%.
The defense contractor headquartered in Bethesda, Maryland, which produces high-end fighter jets and other weapons and aircraft, has a market cap of $109.33 billion; its shares traded around $434.14 on Tuesday with a price-earnings ratio of 15.87, a price-book ratio of 0.57 and a price-sales ratio of 0.63.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 88 implies the company has good outperformance potential, driven by high growth and profitability ratings and more moderate value, momentum and financial strength ranks.
With 0.13% of its outstanding shares, Yacktman Asset Management (Trades, Portfolio) is Lockheed Martin’s largest guru shareholder. Other top guru investors include Steven Cohen (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Jones, Joel Greenblatt (Trades, Portfolio), Catherine Wood (Trades, Portfolio) and John Rogers (Trades, Portfolio).
General Dynamics
General Dynamics (GD, Financial) is held by 15 gurus with a combined equity portfolio weight of 3.58%.
The Reston, Virginia-based aerospace and defense company, which manufactures Gulfstream business jets, combat vehicles, nuclear-powered submarines and communications systems, has a $64.67 billion market cap; its shares were trading around $236.86 on Tuesday with a price-earnings ratio of 40.98, a price-book ratio of 7.47 and a price-sales ratio of 5.42.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The company has good outperformance potential with a GF Score of 81. It raked in a high profitability rating, but the other four ranks are more moderate.
PRIMECAP Management (Trades, Portfolio) is General Dynamics’ largest guru shareholder with 0.32% of its outstanding shares. The stock is also being held by Gayner, Richard Pzena (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Greenblatt, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Jones, Charles Brandes (Trades, Portfolio) and Bernard Horn (Trades, Portfolio), among others.
Boeing
Representing a combined equity portfolio weight of 7.78%, 14 gurus are invested in Boeing (BA, Financial).
The aircraft manufacturer headquartered in Arlington, Virginia has a market cap of $116.67 billion; its shares traded around $193.41 on Tuesday with a price-sales ratio of 1.58.
The GF Value Line suggests the stock is modestly undervalued currently.
Supported by high momentum and value ranks and more moderate ratings for the other three criteria, the GF Score is 71. This means the company is likely to have average performance going forward.
Holding a 0.77% stake, Fisher is Boeing’s largest guru shareholder. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, the T Rowe Price Equity Income Fund (Trades, Portfolio), Hotchkis & Wiley, Cohen and a number of other gurus also have positions in the stock.
L3Harris Technologies
Held by 13 gurus with a 7.68% portfolio weight is L3Harris Technologies (LHX, Financial).
The defense contractor and IT services provider, which is based in Melbourne, Florida, has a $33.58 billion market cap; its shares were trading around $177.55 on Tuesday with a price-earnings ratio of 42.37, a price-book ratio of 1.82 and a price-sales ratio of 1.89.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 87 means the company has good outperformance potential on the back of high ratings for profitability, growth and value as well as more moderate financial strength and momentum ranks.
The T. Rowe Price Equity Income Fund is the largest guru shareholder with a 0.77% stake. L3Harris is also being held by Diamond Hill Capital (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), PRIMECAP, Cohen and several other gurus.
Other popular picks
Additional aerospace and defense companies that were broadly held by gurus as of the three months ended June 30 included TransDigm Group Inc. (TDG, Financial), BWX Technologies Inc. (BWXT, Financial), Northrop Grumman Corp. (NOC, Financial), Moog Inc. (MOG.A, Financial) and AAR Corp. (AIR, Financial).
