1 Defense Stock That Is Up Massively This Year

It hasn’t been a great year for the stock market. The S&P is down more than 20 percent year-to-date, and the Nasdaq lost more than a third of its value. Inflation remains high, interest rates are going up, and the economic outlook is gloomy.

Many experts predict that the current bear market is just the tip of the iceberg. They expect a recession within the next year, and some have forecast a substantial market crash.

However, a handful of companies are thriving despite the nation’s economic woes. The Russian invasion of Ukraine boosted the defense industry, and one defense stock is up massively this year. Lockheed Martin plays a crucial role in the war between Russia and Ukraine, and its contributions to the war effort are showing up in its stock price.

Of course, as every investor knows, past results are no guarantee of future returns. In this situation, the question comes down to this: has Lockheed Martin stock peaked, or will it continue to rise? In other words, is Lockheed Martin stock still a buy?

Why Did Lockheed Martin Stock Go Up?

The fact is that Lockheed Martin struggled through 2021. It was a period of transition that included a new CEO, the sunsetting of mature, revenue-producing programs, and the launch and development of an array of new projects.

A hoped-for rally in defense stocks never came to fruition, then in October 2021, the company’s leaders predicted that 2022 would be similarly weak. Share prices dropped, and Lockheed Martin stock ended the year more than 26 percent lower than the S&P 500.

Lockheed Martin put plenty of effort into persuading shareholders to stick around. It focused on stock repurchases and increased its dividend to make shares more enticing during the transition period.

Investors responded enthusiastically, pushing share prices up. Then, the Russian invasion of Ukraine put the defense industry squarely into the spotlight, ensuring Lockheed Martin stock’s continued rise.

What Is The War Cycle?

Wars tend to be assigned a specific start date based on a precipitating event that sparks armed conflict. For example, the beginning of World War I is credited to the assassination of Archduke Franz Ferdinand, and the North Korean invasion of South Korea officially launched the Korean War.

The Gulf War and the war in Afghanistan are attributed to the attack on the World Trade Center, but in truth, all of these conflicts had been building for some time.

Historians and scholars take a broader view of how wars begin. They examine how economic and societal factors interact in the buildup to war. Through these observations, they have identified specific patterns that they refer to as “the war cycle.”

The essence of this cycle is that there is a period of escalation in which various sources of tension combine and grow more powerful. The escalation stage of the cycle can go on for years before a war begins in earnest.

Eventually, the tension passes a threshold, after which nearly any dramatic event can trigger the outbreak of violence. Soon, the violence reaches a peak, and then there is a period of de-escalation. The war ends, tensions settle, and there is relative peace – until the war cycle starts again.

The Russian invasion of Ukraine in February 2022 wasn’t unexpected. As with other wars, tensions had been growing between Russia and Ukraine for years – even decades. Some say that this war was inevitable from the moment Ukraine declared its independence in 1991, and the situation escalated when Russia annexed Ukraine’s Crimean peninsula in 2014.

Russia considers Ukraine an important acquisition due to its geographic advantages and natural resources. Perhaps more importantly, returning Ukraine to Russian rule would set the stage for Russia to begin rebuilding the empire that dissolved with the breakup of the USSR.

Though the official start to the war began with Russia’s invasion of Ukraine, tensions had been escalating for years. Now it appears possible – even likely – that the armed conflict will expand, as many countries aligned with Russia have a tense relationship with the United States and other members of NATO.

In retrospect, the stages of the war cycle are clearly visible in current events, and it is likely that the world hasn’t yet hit the point of peak violence that comes before tensions fade and conflict deescalates. What does that mean for the stock market?

Do Stocks Go Up During War Times?

A variety of factors determine whether US stocks go up during war times, including the level of US involvement, the war’s popularity, and the duration of the war. However, certain stocks can be counted upon to do well in times of war, regardless of how the larger market performs.

Defense stocks are at the top of the list when it comes to which stocks go up during war times. With experts predicting that 2023 could bring the peak of the current war cycle, Lockheed Martin stock is well-positioned to outperform the market over the next 12 months.

Is Lockheed Martin Stock A Buy?

Lockheed Martin’s leadership position in the defense industry puts shareholders in the right position to realize returns while armed conflicts have the world on edge. When coupled with the company’s cutting-edge programs, most analysts agree that Lockheed Martin stock has more tailwinds than headwinds right now.

Among other projects in progress, Lockheed Martin dominates the competition when it comes to hypersonics, which are critical to the US defense strategy. Defense industry analysts predict the country will spend billions on building up its hypersonic capabilities through 2030.

In addition, Lockheed Martin is a major player in the development and production of Army helicopters, and it is instrumental in the United States’ missile defense systems. These programs are expected to begin generating revenue in 2023, which may also be the peak of the current war cycle. If so, Lockheed Martin stock is nearly certain to go up, which makes LMT a buy.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.