Often times what we hear from politicians and business are too different things. The President likes the to talk about the build up of the Defense budget; business sees an anticipation of slower growth of Pentagon spending and new priorities such as space systems and hypersonic missiles.
In an article in the Wall Street Journal reporters Doug Cameron and Ben Kesling examined the United Technologies and Raytheon proposed merger which if successful would be the third largest areospace and defense company by sales after Boeing and Airbus. 30 years ago there were 50 big companies now a handful exist including Lockheed Martin, Northrop Grumman, General Dynamics and BAE. In the shipbuilding industry there are two companies – General Dynamics and Huntington Ingalls Industries.
The consolidation happened with cuts in the military budgets and the Pentagon has made it easier to deal with large companies and harder for smaller ones.
In terms of overlap there are few divisions that do but there are investors who wanted United Technologies broken into 3 – Otis Elevators, Carrier and Aerospace. It is expected the merger will pass the hurdles of regulatory Washington.
Linking to dividend paying stocks, there is always different perspectives of all industries, for example defense the budgets have increased which should be better for defense companies but the defense companies see a shift from tanks to missiles which are different in the manner they are produced and profitability from each. When you buy your stocks, which perspective are you using to see the company?
There are more questions than answers, till the next time – to raising questions.