How To Profit from a Stronger America 

LOUIS RUKEYSER's Wall Street Week 1mar04

Wealth Wave #1 • Defense Stocks
Wealth Wave #2  • Healthcare Stocks
Wealth Wave #3  •  Emerging Titans of Technology

Hear that roar?  That's the torrent of Pentagon cash gushing into the coffers of hundreds of companies  working feverishly to discover ways to protect our country in an increasingly dangerous world. Graphic by Art Hazelwood from his series of etchings "Hubris Corpulentus" was not part of the original article, but placed here to give a more meaningful image to contemplate while reading Lou's words.  Also see end note.

In the wake of the horrors of September 11, the events in the Middle East and other rising world tensions, there's a life and death race on to develop the technologies and weapons to keep America safe—at any cost.

And it's going to cost plenty. President Bush won $400 billion in defense spending for fiscal 2004. Who knows how much he'll want if we suffer any more terrorist attacks—or the world situation deteriorates further? With the current mood of the American people, Congress will have little choice but to cough up plenty more for defense.

Bottom line? If it's true that successful investing is about following the money, this is one money chase that should be pretty easy to win.

A River of Cash

The sums involved in this effort will be huge. The proposed National Missile Defense System alone could cost $60 billion to $120 billion. And that might be just for starters. The full-scale missile-defense triad of sea-, space- and ground-based interceptors that President Bush is calling for could cost $240 billion.

Even without this fantastically expensive project, total military spending by the U.S. over the next three years is projected to top a trillion dollars.

Free Report Reveals Top Prospects in a Newly Preeminent Industry

As we seek to rid the world of terrorism, the hopes of a nation now rest on the shoulders of the defense industry's most committed and resourceful players.

Modern warfare has entered a new and ill-defined age. The threat is no longer simply guns and bombs, but cyber war, chemical agents and biological weapons. You can be sure that a growing share of the immense national defense budget will go to creative companies developing equally innovative countermeasures.

So I asked the editors of Louis Rukeyser's Wall Street to check with top market experts for the defense companies they now regard as truly promising prospects. We have just released the results of this work in a new special report: Fighting the Next War: Six Companies Protecting America.

We are reserving a free copy of this report for every investor who is serious about rebalancing his or her portfolio in this post-attack world. You'll find the request form for your copy on page 21 of this special issue.

Rarely Do Investors Face Such a Clear-Cut Choice

You make a lot more money in Wall Street by being right on the big trends than on specific one-time events. Through the years, I have found that if you correctly call the major direction of powerful economic forces, your investments will prosper as surely as day follows night. The opportunities we're focusing on in our new report, Fighting the Next War, are the ones that those who follow them closely now believe will allow you to ride powerful and lasting trends—the kind that can fatten your portfolio for years to come. We urge you to look them over.

Leaf through your free copy and you'll find companies that provide many of the jets, weapons and technologies that will help America win her long-term war with terror. Here are a few examples...

How Long Will the Military-Spending Boom Last?

A good long while, it appears. Even after the current war on terrorism cools down (which itself could take years or decades), there are plenty of other conflicts to keep the weapons-makers busy. Right now, there are more than 30 insurgencies, uprisings, struggles, guerrilla movements and full-fledged wars being waged worldwide.

Sadly, the business of war is a growth business and has been so for a while. The Clinton administration sold more weapons overseas than any other administration in history. And with the Bush administration intervening in Iraq, our expansionist-foreign-policy trend looks to be securely in place. Which means the money spigot flowing from the Pentagon to defense contractors won't be turned off anytime soon. After all, if you're going to be the world's policeman, you'd better have a powerful pistol.

One last thought: While it would be wonderful if the demand for weapons dried up tomorrow, thousands of years of human history argue against it. And Louis Rukeyser's Wall Street is engaged in the realpolitik of investing, not wishful thinking. No one ever improved the world—or their financial lot in it—by ignoring the way the world really works, That's why we've released Fighting the Next War. Six Companies Protecting America—and why we urge you to send for your free copy right away.— LR

• Ammo Powerhouse. If it's shot out of a barrel, this ordnance specialist probably makes it: artillery, rifle and helicopter-gunship ammunition... "smart" munitions... warheads... artillery-delivered land mines... you name it.
  
  A key reason the defense experts like this contractor is its dynamic CEO. Formerly commander of the U.S. Navy's Atlantic command, he knows the key Pentagon players. Maybe that's one of the reasons why business is booming (with a paid-for backlog of $5.2 billion) and profitability is so much higher than its peers'.
  
  Virtually all the company's products have market-leading positions and what's more, it is the sole provider for 70% of its contracts. So its customers have little choice but to come back and buy again and again.
  
  Buy this stock and you'll also be part of the space-exploration effort. The firm's space-shuttle division makes engines for space-launch vehicles and is the world's top producer of solid rocket motors. This significant "civilian" revenue will help shore up your bottom line if military spending ever drops off.
  
  
• By Air or By Sea. The experts we consulted tell us that this cutting-edge outfit reigns supreme in electronic war-fare, which they consider a key area in line to benefit handsomely from increased military spending. The company offers a smorgasbord of aeronautical and undersea-warfare systems.
  
  In the air, it's the lead manufacturer of the B-2 Spirit stealth bomber, the E2-C Hawkeye aircraft and the Global Hawk unmanned aerial vehicle. Its radar controls the missiles shot by F-16 fighters and Apache helicopters. It also produces AWACS early-warning radar, Longbow Hellfire missiles and BAT "brilliant" anti-armor munitions.
  
  At sea, it's a major builder of destroyers, assault ships, military-transport ships, aircraft carriers and submarines. On top of all that, it is also the world's #1 supplier of civilian air-traffic-control systems. This will also help keep revenues flowing if defense spending ever slows.

Why Wartime Breeds Amazing Creativity...

War is often the mother of devastating new weapons. With their long bows, 14th-century English archers decimated the "invincible" knights of France and revolutionized warfare for a century.

Terrifying metallic monsters later known as "tanks" ushered in the age of mechanized warfare as they routed stupefied World War I infantrymen and cavalry.

The desperation of war has always been a fertile breeding ground for invention. The 21st-century battle against terror is no exception.

Here are just a few of the new weapons that were used for the first time in Afghanistan...

• The Predator—a remote-controlled unmanned aerial vehicle that finds and attacks the enemy. First used for surveillance in Bosnia and Kosovo, the Predator is now equipped with Hellfire missiles it can fire the instant it detects a hostile force.
• JDAMs (Joint Direct Attack Munitions)—precision bombs guided by laser and globalositioning satellites. Delivering destruction with unprecedented accuracy, they can be launched from jets or bombers in any kind of weather and at a safe 15-mile distance from the target. Armed with these lightning-fast pinpoint bombs, a squadron of planes can obliterate 1,000 targets per mission, instead of the 170 during the Persian Gulf War.
• The thermobaric bomb—a 2,000-pound fire-breathing monster that penetrates deep into caves and tunnels, sucks all the air out and instantly incinerates anyone inside. Without this powerful advantage, rooting out al Qaeda fighters holed up in Afghanistan's mountain caves could have been a bloody replay of WWII's hand-to-hand combat in the South Pacific, rather than the virtually loss-free operation it was (for us).

...and Future Fortunes

It's obvious that the direction of future weaponry is smart and automatic—using our technological advantage to increase our fighting power while keeping our soldiers safer.

And as this new technology is adapted for civilian use, further fortunes stand to be made.

Here are just a few of the weapons now on the drawing board that will help us win our war on terror while offering outstanding future commercial potential:

• The Hummingbird, an unmanned helicopter that can carry a 300-pound load 2,500 miles and stay aloft for 40 hours.
• The Organic Air Vehicle, a tiny five-pound aircraft measuring less than 12 inches in any dimension. It can detect enemies hidden in thick forests or behind buildings and relay their exact position to artillery or aircraft.
• The Unmanned Ground-Combat Vehicle, which ventures into the heat of battle by remote control—without putting human crews in danger.

The contractors the Pentagon has picked to develop such weapons of the future are the sort of innovators that stand to rake in exceptional profits as U.S. defense spending rises. And they're exactly the sort of nimble and aggressive competitors profiled in Fighting the Next War: Six Companies Protecting America. (Once again, you can get a free copy of this important publication with your introductory trial subscription to Louis Rukeyser's Wall Street.)