The world is a dangerous place. Russia and Ukraine have been in conflict for over two years. Iran and Israel have been lobbing missiles back and forth at each other. Other potential hotspots exist that could flare up at any time.
That’s why defense spending in the United States and elsewhere is on the rise. That includes investing in refueling and refilling existing weapons platforms. It also includes creating and designing new ones that can stand the test of time.
Defense and aerospace industry leader Lockheed Martin (LMT) just reported earnings. They were solid, and investors worried about the company’s performance in 2024 have one less thing to worry about. Now, however, there are some fears for 2025.
For investors, this could mark the start of a buying opportunity. Defense needs aren’t going away. And the U.S. and its allies are looking to continue spending strongly on the military and defense.
Lockheed has grown revenues by 9% over the past year. Overall earnings have been flat. But at 21 times forward earnings, shares still trade at a discount to the overall market.
Action to take: Long-term investors may like to build a position in shares here, and use any further pullback to add to that stake. At current prices, Lockheed pays a 2.2% dividend.
For traders, the January 2025 $640 calls, last trading for about $5.50, could see high double-digit returns on a rebound in shares from their post-earnings selloff.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.