For investors thinking of including defense stocks in their portfolio, the news of the Air Force’s secret development of a new fighter jet would have major implications. The next-gen fighter plane was until now a top secret, but the prototype has now been revealed and is called Next Generation Air Dominance (NGAD). So how are defense contractors likely to be affected by this?
A Ground-breaking Fighter Concept
For over two decades, the Air Force has been looking to bring a new fighter concept into reality. The F-35 Joint Strike Fighter by Lockheed Martin ($LMT) is the result of that concept. But even that concept would eventually become obsolete, which is why the Air Force has been on the lookout for another new fighter jet.
As per an interview with Will Roper - acquisition head of the Air Force - published by Defense News, the military has not only designed and built one secretly, they have also flown the new sixth-gen fighter. Roper also mentioned that the prototype set new flight records in the process and that the manufacturing technique would be unique as well.
Why Defense Stocks Could Get a Boost
This could provide new opportunities for defense contractors, according to Motley Fool analyst Lou Whiteman. But due to the secrecy of the whole project, there really isn’t any information about the manufacturers.
● Investors can only think of Boeing ($BA), Northrop Grumman ($NOC) and Lockheed Martin as potential candidates. The latter has been leading defence research and has been known for developing many secretive aircraft projects for the Air Force via its Skunk Works division. The company has developed the SR-71 and U-2 spy planes.
● But Northrop Grumman hasn’t been out of the equation either. It beat the Lockheed-Boeing joint proposal for developing the B-21 Raider bomber. Northrop Grumman was also present in the F-22 contest, where it finished runner-up. The company also reportedly has many space projects in the pipeline.
● Boeing also has been in major contests, finishing runner-up but actually winning a contract worth $9.2 billion for manufacturing the T-X trainer jet in 2018. But Roper has thrown the hint that there could be new players in the game because of the need for advanced techniques of manufacturing to produce the new generation plane. Whitemen reckons that this hint could indicate advanced manufacturers such as Virgin Galactic ($SPCE), Blue Origin or even SpaceX. So, you need to keep watching this space.
Dow Jones Falls
Meanwhile, Dow Jones (DJIA) slipped by over 950 points as the week began on September 21, 2020. Even the S&P 500 was close to correction territory. Various reasons have been cited for that. Among these is the growing infection rate of Covid-19 in European countries that raises fears of further lockdowns, and the dip in banking stocks as a result of news emerging about banks’ dealings with controversial customers.
Regardless of the decision of the Air Force, make informed trading decisions using TradeZero’s advanced direct access trading platforms.
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