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Tickers in this Article: LMT, BA, NOC, DRS, COL, GD, RTN, CW
Much like Lockheed-Martin's (NYSE:LMT) F-117 "Night Hawk" Stealth Fighter, defense stocks have managed to stay off of most investor radars lately. However, I think it's time we started tracking them again. Not only did they hold up better than most stocks during the December/January dip, but military and non-military contracts have been awarded at a blistering pace over the last couple of months.

What about the uncertainty of military spending under the next president's regime? Though it's still uncertain who will be the president come November, I'm pretty certain any of the remaining candidates will tap the entire military budget in 2009.

Besides, next year's budget is established by this year's White House, one of the most pro-defense presidencies ever. The $614 billion in military funding President Bush has asked for in fiscal 2009, if approved, would be the most spent on the U.S. military (inflation adjusted) since World War II.

Aerospace is Grounded
Although the generic term "defense" has historically included aircraft manufacturers, my use of it here is in the literal sense, almost entirely exclusive of aerospace-focused companies like Boeing (NYSE:BA) and Northrop Grumman (NYSE:NOC).

Why is one primed to do well but not the other? I see two reasons.

The first reason is, warfare has changed. Tanks and planes are being replaced by technology. The second reason: most aircraft manufacturers aren't tooled to make much of anything else, where most military technology and equipment companies can adapt to make a variety of marketable goods.

Two For The Show
DRS Technologies
(NYSE:DRS) may be a little off the beaten path compared to a major military or defense contractor like a Rockwell Collins (NYSE:COL) or General Dynamics (NYSE:GD), but this little electronics maker is holding up among the big boys.

Last fiscal year (ending March 31, 2007), DRS did $2.8 billion in sales. Through the first three quarters of 2008, it's done $2.3 billion in business. And in just the first three months of 2008, DRS Technologies has been awarded at least $610 million worth of business, which will be booked over the next few years.

Raytheon (NYSE:RTN) doesn't appear to be hurting either. The trailing P/E ratio of 11.2 is low by any industry's standards, and we're seeing consistently-respectable margins. And like DRS, Raytheon has scored some big contracts in just the last two months, including deals with NASA and South Korea.

Curtiss-Wright Can't Be Wrong
Perhaps the biggest winner of late has been Curtiss-Wright (NYSE:CW). In late March, Westinghouse awarded the company a contract to help complete a nuclear power plant. The dollar amount involved was not disclosed, but the total project budget was $2.5 billion .

Only a few days before the Westinghouse news was out, Curtiss-Wright won a contract from the Japan Ministry of Defense, again for an undisclosed amount. In mid-March it received two military contracts worth a total $9.8 million. The list goes on and on.

All the business wouldn't necessarily impress me, since a solid top line doesn't always mean a nice bottom line. In Curtiss-Wright's case, though, the company is actually translating sales into earnings. In its 2007 fourth quarter, earnings increased by 43%, from $26.8 million in the fourth quarter of 2006. For the full year, earnings improved by 30% over the 2006's $80.6 million earnings, while sales were 24% greater than the $1.3 billion sales in 2006.

The enticing part of this is simply that awarded contracts aren't booked as revenue until the contract (or at least benchmark stages of them) is complete. With five new contracts already in hand, 2008 and beyond could be even stronger.

Looking Ahead
Although a troop pullout from Iraq in 2008 and 2009 would certainly preserve some of the total defense budget, the bulk of U.S. defense fund is spent elsewhere. The war in Iraq costs more than $15 billion per month, according Arkansas Senator Blanche Lincoln, while the proposed defense budget for next year tops $614 billion, and you can bet any money saved from a withdrawal will make its way somewhere besides back into taxpayer's pockets.

The one potential trump card is the presidential election; any of the candidates could theoretically scale the budget back if elected. However, none of the front-runners have even suggested they'd do so. Democratic front-runners Hillary Clinton and Barack Obama have both said they see a need to expand and modernize the military. I think John McCain is likely to be at least as generous when to comes to investing in defense. Either way, both parties are likely to put a great deal of attention on technology and equipment that will keep troops out of harm's way in the first place. So, defense contractors stand to have yet another great year.

For more on the defensive advantages of defense companies, check out A Prelude To Sinful Investing.

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