Chart of the Day: Anything But Defensive

Apr 23, 2019

This morning, Lockheed-Martin (LMT) smashed earnings expectations, reporting $5.99 EPS for Q1 versus $4.34 expected. The beat was driven by sales of $14.3bn, exceeding analyst estimates of $12.6bn, and also came with a dramatic upgrade to guidance for all financial metrics this fiscal year. The triple play from LMT joined strong reports from Textron (TXT) and United Technologies (UTX). Together, these three companies are seeing combined revenues grow at a staggering 18.7% YoY, the fastest since defense spending’s huge ramp up following the 9/11 attacks and the invasions of Afghanistan and Iraq. Among other defense contractors, analysts are projecting revenue numbers for Q1 that would indicate a significantly lower revenue growth number, but if the results from LMT, TXT, and UTX are any indication, those forecasts are going to be handily beaten.

So which of the other defense contractors currently look the most attractive?

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Chart of the Day: Fourth Best Start on Record in Junk Bond Market

Apr 17, 2019

After a rough Q4 for the junk bond market, 2019 has turned into a banner year for the sector.  As measured by the Merrill Lynch High Yield Master Index, the total return for the high yield market through Tuesday’s close has been a gain of 8.67%, making it the fourth-best start to a year for the sector on record and the best start since 2009. This year’s gain also marks the eighth time since 1987 that the high yield market had gained more than 6% through 4/16.

So how does the junk market perform for the remainder of the year after such strong starts like 2019?  And how about the equity market as well?  Below is a chart showing rest-of-year returns for junk bonds and the S&P 500 in all years since 1987.  Years where junk bonds rallied 6%+ through 4/16 are shaded in grey.

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