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The 3 Best Stocks to Watch for the Future of Defense

Avenger Missile Launcher
Avenger Missile Launcher

In 2009, Boeing tried to turn its Avenger anti-aircraft system into a laser Avenger anti-aircraft system. Photo: Boeing .

Boeing

Since taking the lead on the Pentagon's Airborne Laser project more than a decade ago, Boeing has remained a force to contend with in the race to convert the American military to laser guns. Last year, Boeing unveiled a new 10 kilowatt High Energy Laser Mobile Demonstrator, or HEL MD, small enough to be loaded onto an armored car, accurate enough to shoot down fast-moving incoming artillery targeting U.S. troops, and powerful enough to destroy hostile unmanned aerial vehicles, as well.

Boeing's working fast to up the power of its HEL MD, as well, with the Pentagon targeting a power output of 50 or 60 kilowatts, or even more, to boost the weapon's range and lethality. The company also has other "laser gun" projects in the works, including the most recent announcement of a modular, four-part compact Laser Weapons System that can be carried by infantry on the ground -- no armored car required.

Regarding the stock, Boeing shares sell for about 18 times earnings -- about average in the defense industry. But Boeing boasts projected earnings growth of 12% annually during the next five years, significantly higher than the average.

Lockheed Martin's laser ambitions are arguably more ambitious than either Boeing's or Raytheon's. While its rivals are busy building lasers to shoot down airplanes, Lockheed Martin wants to build one that can shoot down an airplane, and attack targets on the ground.

No longer in service, the early 2000s Airborne Laser Project was a team effort among Boeing, Northrop Grumman, and Lockheed Martin. Photo: Wikimedia Commons .

Lockheed Martin

Lockheed Martin's laser ambitions are arguably more ambitious than either Boeing's or Raytheon's. While its rivals are busy building lasers to shoot down airplanes, Lockheed Martin wants to build one that can shoot down from an airplane, and attack targets on the ground.

Lockheed is already working on a 60 kilowatt high-energy laser in the works for Army use (ETA: December 27, 2016 ), and has videos online showing its effectiveness at 30 kilowatts . Lockheed also has a contract with DARPA to design a targeting mechanism for firing lasers from moving aircraft -- with rumors that the first trial could be aboard a Lockheed Martin AC-130J gunship .

Lockheed's shares are priced somewhere in between Boeing's and Raytheon's at 17.2 times earnings. It's projected to grow earnings at 8.9% annually during the next five years. Perhaps best of all, Lockheed pays a more generous dividend than either Boeing or Raytheon -- 3.2%.

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We don't have a photo of Lockheed Martin's latest laser gun to show you -- but this pic proves that Lockheed's laser exists -- and that it works. Photo: Lockheed Martin .

The article The 3 Best Stocks to Watch for the Future of Defense originally appeared on Fool.com.

Fool contributorRich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 342 out of more than 75,000 rated members.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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