Boeing, Lockheed in Trump’s Twitter Crosshairs

Sixty-one.

That’s how many businesses Donald Trump has targeted using his Twitter (TWTR) account, according to Yahoo! Finance analysis.

From Amazon to the Wall Street Journal, the president-elect has called out a wide array of automakers, telecoms, airlines and media outlets over the past few years.

But now that he is the incoming president, these companies are paying close attention. Even if they don’t instantly see the message aimed at them, big moves in their stock prices likely send them rushing to check their social media accounts.

Just ask a high-profile pair of defense companies …

The iShares U.S. Aerospace & Defense ETF (ITA) has gained 5% post-election. But some of those dips correspond directly with strikes from Trump’s Twitter feed.

During the presidential campaign, Trump called for an increase in defense spending. As part of his plan, he wants to boost troop levels and the number of ships and aircraft.

A spokesperson estimated that we could see a $500 billion spending increase over 10 years. And Trump would seek to “fully offset” it through “common-sense reforms that eliminate government waste and budget gimmicks.”

The incoming president’s first proposed reform came on Dec. 6 when he put Boeing (BA) on the spot about the next generation of presidential aircraft.

He did so, of course, using his favorite platform:

Trump elaborated to reporters at Trump Tower,

“The plane is totally out of control. It’s going to be over $4 billion for (the) Air Force One program, and I think it’s ridiculous. I think Boeing is doing a little bit of a number. We want Boeing to make a lot of money, but not that much money.”

His spokesman added,

“[Trump’s comments] really speaks to the president-elect’s focus on keeping costs down across the board.”

One observer was surprised Trump would cancel the order rather than simply refuse to pay Boeing once the work was completed.

As much as we might admire the incoming commander-in-chief’s wish to curb government spending, not everyone agrees with Trump’s assessment …

“So it [Air Force One] is a bit more complicated than perhaps meets the eye.” — Air Force Secretary Deborah Lee James

Air Force Secretary Deborah Lee James said the two planes are so expensive because the new Air Force One would be able to defend itself against missile attacks.

The aircraft would give the president the ability to communicate with nuclear forces, and allow him or her to run the government for extended periods of time if need be.

She noted,

“Air Force One, although it is a 747 platform, is way, way more than what you would think of as a commercial airliner. This is carrying the president of the United States. It has to go long distances; it has to survive under difficult circumstances, much more difficulty than a normal civilian airliner. So it is a bit more complicated than perhaps meets the eye.”

BA slid 1% in the premarket the morning of Trump’s tweet.

Lockheed Martin Corp. (LMT) also felt the wrath of Trump’s tweetin’ …

Shares of LMT tumbled 3% following Trump’s tweet. The S&P Aerospace and Defense Index declined 1.2%.

Lockheed Martin’s F-35 Program Manager Jeff Babione responded,

“I certainly welcome the opportunity to address any question that the President-elect would have about the program. Lockheed Martin and its industry partners understand the importance of affordability for the F-35 program.”

This isn’t the first time the F-35 has come under fire for delays and cost overruns. Sen. John McCain (R-Ariz.) said,

“It has been both a scandal and a tragedy with respect to cost, schedule and performance.”

Trump’s attack on Lockheed intensified when he challenged Boeing to come up with a less-expensive version of Lockheed’s F-18 Super Hornet.

LMT dipped about 2% in aftermarket trading.

Will Trump’s Rants Prompt Boeing, Lockheed To Drop Their Prices by a Billion or Two?

Perhaps. After all, it worked for Iran …

Iran’s Deputy Transport Minister Asghar Fakhrieh-Kashan said,

“Boeing has announced that its IranAir contract is worth $16.6 billion. However, considering the nature of our order and its choice possibilities, the purchase contract for 80 Boeing aircraft is worth about 50 percent of that amount.”

Boeing gave in to Iran’s demands and negotiated a steeply discounted price.

So with those recent Trump-tweets in mind, should you ignore companies in the aircraft sector, especially producers of military equipment?

Not at all.

You see …

The U.S. is Still No. 1 in Weapons Sales!

About $40 BILLION for 2015, according to a congressional study. France is No. 2 with $15 billion.

Qatar was the largest buyer at $17 billion. Egypt was second, buying almost $12 billion in weapons. Saudi Arabia came in third with over $8 billion.

How have the two prime recipients of Trump’s attempt to shame big companies into negotiating better terms with the government done over the past 12 months?

BA is up 22%. Plus, it pays a 3.65% dividend.

LMT up 21% and pays 2.91%.

And the ETF that seeks to track the Dow Jones Aerospace and Defense Index (ITA) is up 27% with a 1.48% yield.

Boeing and Lockheed are top holdings in ITA, along with other major government contractors like United Technologies (UTX), Northrop Grumman (NOC) and General Dynamics (GD).

As you can see, we investors shouldn’t get rattled every time Trump goes tweetin’ …

In fact, my Cash Flow Kings subscribers have been positioned in Boeing since August, and they are sitting on a nice 20% gain right now. We also recently added another of the defense names we talked about today.

And even with all of Trump’s Twitter chatter, the stock — which I told my newsletter readers is the “best defense stock around” — is up a couple of percentage points just over the past few weeks.

Consider why the president-elect is tweeting at these companies …

Not because he doesn’t plan to spend big bucks on defense … but because he DOES want to ramp-up the military during his administration.

And per the Trump negotiating M.O., the president-elect is setting the stage for favorable business dealings with these defense contractors down the road.

That’s good news for defense companies, good news for America … and bad news for those on the receiving end of an F-35 tactical strike that aren’t ready and able to respond.

Best,

Brad

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