Defense stocks consist of equities investors turn toward during economic or geopolitical tumult. While inflation may be under control and interest rates likely to come down later in the year, geopolitical conflicts continue proliferate. These days there is not only a war in Ukraine, but also one in the Gaza Strip. However, not all of these companies are a solid investment choice. Many investors have put their money towards defense stocks to sell. The iShares U.S. Aerospace & Defense ETF (NYSEBATS:ITA) has risen about 2.9% on a year-to-date basis, which trails where the Nasdaq and S&P500 have appreciated.
This means there are definitely several underperformers in the mix. Without further ado, below are three, sorry defense stocks to sell in February.
Boeing (BA)
Boeing (NYSE:BA) has been going through a crisis of confidence in terms of its manufacturing capabilities, despite the decades that the company spent developing itself into a leading manufacturer of commercial and military aircraft, satellites and rockets. There were two fatal crashes of its 737 MAX jet in 2019 and 2020.
Most recently, the emergency exit door bolts of a 737-MAX owned by Alaska Airlines flew off mid-flight, causing a depressurization event. While no one was seriously harmed, Boeing’s reputation certainly was. The Federal Aviation Administration, in turn, halted the expansion of 737-MAX manufacturing.
United Airlines (NASDAQ:UAL) is under regulatory scrutiny after a number of near catastrophes on its Boeing planes. Moreover, Korean Air and Japan Airlines (OTCMKTS:JAPSY), both of which tend to be loyal Boeing customers, have recently signed major deals with Airbus (OTCMKTS:EADSY), a major blowback for Boeing.
These delays and manufacturing inadequacies have, of course, blighted Boeing’s share performance. The aircraft manufacturer’s stock is down more nearly 28% for the year, and investors are perhaps better off selling now before things get worse.
Northrop Grumman (NOC)
Northrop Grumman (NYSE:NOC) is another weapons manufacturer that received a boost after the October 7 attacks in Israel, jumping more than 8% on that day. For those who don’t know, Northrop Grumman is known for developing drones and missile defense systems. The defense firm generated more than $39 billion in revenue and $2 billion in net income over the past twelve months.
However, last year, Northrop’s stock fell 13%. The company’s costly B-21 Stealth Bomber program with the U.S. Airforce was primarily to blame. Furthermore, Northrop’s fourth quarter earnings came in at a loss due to a $1.2 billion charge related to the running costs of the program.
Overall, in 2024, shares have essentially traded flat, which underscores why investors should dump NOC shares and look for other opportunities in this bull market.
L3Harris Technologies (LHX)
L3Harris Technologies (NYSE:LHX) provides a number of mission-critical communications, intelligence and airborne solutions for government and commercial customers on a global scale. The company’s Integrated Mission Systems (IMS) segment provides intelligence, surveillance and reconnaissance (ISR) systems. L3Harris’s Space and Airborne Systems (SAS) segment offers space payloads, sensors, electronic warfare systems and mission avionics. The company’s Communication Systems (CS) segment provides broadband communications, tactical radios and other end-to-end battlefield systems to the Department of Defense and other federal agencies. These are not all of L3Harris’s business segments, but they did generate an overwhelming majority of $19.4 billion revenue figure in 2023.
While defense stocks may be back in fashion in one sense, L3Harris’s stock price has struggled to beat the market. Shares have only risen a little over 1%, which gives LHX a position on this sell list.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
