Friday, September 17, 2010
Today I bought General Dynamics (GD) stock at $62.45. Like most of my investments, I bought it because of fundamentals and how it diversifies my portfolio. I will manage the position with my Stock Trading Riches system.
In the August 30 issue of Forbes Magazine, money manager Ken Fisher recommended GD at $64.20. He felt that it was very cheap at that price (9 times likely 2010 earnings and 80% of revenue).
GD is the fifth largest defense contractor. It sells ships, submarines, tanks, planes, and computer systems to the militaries of the U.S., as well as other countries.
Finally, he said that its 2.6% dividend yield is competitive with 10 year treasury bonds. He feels that it is better way to bet on government growth than buying bonds.
Based on the analysis above, I decided to buy GD because it fits a need in my portfolio - a large company with extensive government contracts that will allow me to profit from growth in government.
Stocks that benefit from increased government spending can also hedge your finances if taxes should increase. This is similar to how I didn't feel "pain in the pump" when gas prices went up before the recession because, while I was paying more to fill my car, my Apache Energy (APA) stock was increasing.