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How To Play Defense Stocks Under Trump's Administration

How To Play Defense Stocks Under Trump's Administration

President-elect Donald Trump's tweets are causing a firestorm among defense stocks.

First, Trump blasted Boeing Co (NYSE: BA) over the soaring cost of manufacturing the next-generation Air Force One fleet. The president-elect also targeted Lockheed Martin Corporation (NYSE: LMT) on December 12 over the rising cost of the F-35 program, and then followed up on Thursday with a tweet suggesting the company's F-18 contract could be handed over to Boeing due to the "tremendous cost and cost overruns."

So, how the heck are investors supposed to invest in defensive stocks when a single tweet from Trump results in a selloff?

Doug Ramsey, The Leuthold Group chief investment officer, was a guest on CNBC to answer this pressing question.

Expert Weighs In

Ramsey acknowledged that Trump's tweets do represent a "complete wild card that I don't know how to read," but the group as a whole represents good value to investors.

"The valuations are attractive, the earnings estimate revisions look pretty good — at least until the last couple of weeks," Ramsey said. "The stocks have started to move post-election."

Fighter Jets Aren't Cars

CNBC's Steve Liesman weighed in and suggested that replacing a Lockheed Martin fighter jet with one from a competing fighter jet maker isn't the same as replacing a "Chevrolet with a Chrysler."

"These are not inter-changeable commodities, and I'm not sure the president-elect has come to that conclusion yet," he said.

Liesman added that he believes Trump will eventually come to this conclusion and understand that you can't simply replace one fighter jet with another based solely on cost.


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