Raytheon vs. Honeywell: A Basic Guide for New Investors

The success of your wealth-building strategy relies on two major factors: the return on your investment and the amount of time your money is left in your account to grow. Cash in standard savings and money market accounts offered by your bank is likely to grow at rates that barely keep pace with inflation.

In 2018, the average annual percentage yield (APY) for standard bank products is around one percent. Sometimes, slightly more interest is paid for higher balances, but not enough to make a difference. The rate of inflation has averaged approximately 2.5 – 3 percent.

Investors looking for a significant rate of return must consider alternative options, such as covered calls and individual stocks. These investments carry a higher risk, but the possible reward is much more likely to help you meet your financial goals. Choosing which industries to invest in, as well as which specific company stock to purchase within those industries, is the most important decision you can make when it comes to achieving the returns you want.

The Pros and Cons of Investing in Defense Companies

Defense companies have many of the qualities that experienced investors look for to maximize returns. Though individual company values rise and fall as they are impacted by business challenges and opportunities, the industry as a whole has a strong historical track record. Investors who have put money into defense companies over the past three years enjoyed significant profits, and stock prices for several major defense companies doubled in that period.

In the United States, defense spending is a massive part of the overall federal budget, and there is considerable commitment to maintaining these funding levels. Additionally, many of the largest defense companies are expanding to the international market. In short, the defense industry has two important pros: a solid customer base and low risk that demand will decrease.

Of course, there is always risk involved in any stock purchase, and defense companies are no exception. These businesses have less freedom to expand, as their customers are limited to the federal government and the government of specific allied counties. Unless these organizations diversify into products for the private sector, they are vulnerable to changes in the political and international economic climate.

It is also important to note that high-quality defense stocks are on the expensive side, particularly in the current marketplace. Defense is a cyclical industry, and strong companies are close to are at the top of the current cycle. Some analysts indicate that smart investors should wait until the prices bottom out again.

Is Raytheon Stock Worth Investing In?

When it comes to industry winners, Raytheon (NYSE: RTN) leads the pack.

This company has made a name for itself with state-of-the-art radars, sensors, missiles, and missile defense. Nearly one-third of sales are to international customers, and Raytheon has a larger global presence than its competitors.

As defense spending increased over the past three years, Raytheon emerged a winner. Stock prices increased nearly 80 percent. In 2018, both earnings and revenue have exceeded expectations, further improving the company’s value.

Demand for Raytheon’s missiles and missile defense systems are expected to grow in coming years, as the Pentagon has indicated an intention to replenish depleted supplies. Better still, international interest in Raytheon’s innovative technology promises an expanded marketplace.

Raytheon stock is priced high at the moment, and some analysts believe it is overvalued. Investors considering a Raytheon purchase must balance the likelihood of a plateau or correction in price versus the likelihood that prices will continue their meteoric rise.

Is Honeywell Stock Worth Buying?

Honeywell (NYSE: HON) is an industrial powerhouse that often tempts the same investors interested in Raytheon stock. This organization is notable for its diverse product line, as well as its leadership position when it comes to safety/security, aerospace, and performance materials.

The company has been on the receiving end of criticism for some time, because analysts disapproved of the sheer volume of business lines in this conglomerate.

Honeywell made the decision to focus on products related to the transformation of manufacturing through software and technology. In 2018, two large divisions will be divested. Some analysts believe this will put Honeywell is a strong position to grow and expand its core businesses.

So far this year, Honeywell’s financials have been impressive. Adjusted earnings per share and revenue went up, and there is a strong demand for Honeywell’s expertise in the aerospace marketplace.

Stock prices started the year relatively low, and they have steadily crept upwards. Some analysts – and Honeywell’s CEO – believe that the current stock price is “a steal”, and they indicate their belief that large increases are forthcoming.

Raytheon vs. Honeywell: Which Stock Is Better?

Stock trading can be a risky business, and unexpected developments within the company, in the industry as a whole, and in the global financial landscape can transform an organization’s prospects overnight. However, based on information currently available for both companies, Honeywell has a slight edge over Raytheon.

While Raytheon stock value is likely to grow, especially long-term, it is already priced quite high. It would be surprising to see stock prices continue to increase at current rates of growth. On the other hand, Honeywell is relatively affordable, and all indications point to plenty of room for additional value.