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Border Talks on Hold! Buy 4 Shutdown-Proof Stocks Now

Tirthankar Chakraborty

Another government shutdown looms large as both the Democratic and Republican lawmakers clashed over the immigrant detention policy during the weekend. Republican Senator Richard Shelby confirmed that talks on border security funding are stalled currently as Democrats desired to cap the number of beds in detention facilities for those people who have entered the country illegally or are arrested by U.S. Immigration and Customs Enforcement (ICE) agents.

Sources familiar with the negotiation said that Democrats proposed the lowering of cap on detention beds from the current 40,520 to 35,520. In fact, Democrats want 16,500 beds at detention facilities for undocumented immigrants captured in the interior of the country.  Meanwhile, the remaining beds are to be placed at border detention centers. This breakup on detention beds will eventually compel ICE agents to focus more on arresting criminals and not law-abiding immigrants, said a House Democratic aide.

The aide added that “a cap on detention beds associated with interior enforcement will rein in the Trump administration’s deportation agenda, prevent the Trump administration from shifting more funding to detention beds than Congress has agreed to, and restore immigration enforcement to the levels that were in place at the end of the Obama administration.”

Republicans, in fact, hesitated at the Democrats’ sub-cap offer. Republican Senator Lindsey Graham, who is close to Trump, has warned that limiting beds won’t do any good. He said on Fox News “Donald Trump is not going to sign any legislation that reduces the bed spaces. You can take that to the bank.”

Shelby, in the meantime, said that chances of reaching a deal by Feb 11 are 50-50. The lawmakers had hoped to reach an agreement by Feb 11 and get the deal passed through the U.S. House of Representatives and Senate, and signed by Feb 15.

How to Design a Shutdown-Proof Portfolio?

As talks came to a standstill over the weekend in a disagreement over limits demanded by Democrats on the number of places available in detention centers, America could be headed for another government shutdown. Naturally, investors might be pondering how to design a shutdown-proof portfolio. Military spending is an essential part of the U.S. government. Defense stocks, hence, aren’t tied to U.S. federal spending trends and are unperturbed by any political impasse.

Trump has already expressed interest to rebuild the U.S. military by bumping up Pentagon’s budget. The President approved two defense-friendly budget bills that helped increase the Pentagon’s budget to $700 billion in 2018 and $717 billion in 2019. Meanwhile, Trump said that “for years, the United States was being treated very unfairly by NATO, but now we have secured a $100 billion dollar increase in defense spending from NATO allies.” Lest we forget, Trump had earlier threatened to trim U.S. military support if its allies didn’t raise defense spending.

At the same time, America is looking to develop a state-of-the-art missile defense system. And it’s only because Russia repeatedly violated the agreement by building banned weapon. Trump announced that “the United States is officially withdrawing from the Intermediate-Range Nuclear Forces Treaty, or INF Treaty.” Last but not the least, Trump claimed that American astronauts will go back to space with American rockets.

With such political unrest shrouding the investment scenario, rising sales of arms is but obvious. Sales of guns have increased significantly, pushing shares of companies like Sturm Ruger & Company RGR, Vista Outdoor VSTO and American Outdoor Brands AOBC up. Having said that, it’s certainly not good for the society and it’s a sad development. Then again, purely from an investment stand point, publicly-traded gun stocks look appealing amid a likely new government shutdown.

4 Solid Picks

We have, thus, selected four stocks from the area that remain unperturbed by a possible government shutdown.

The Boeing Company BA designs, develops, manufactures, sales, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services. The stock currently has a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its current-year earnings has moved up 9.1% in the past 60 days.

The company’s expected earnings growth rate for the current quarter and year is 15.9% and 23.3%, respectively. The company has outperformed the broader Aerospace - Defense industry so far this year (+25.6% vs +19.1%).

Northrop Grumman Corporation NOC operates as a security company for government and commercial customers. The stock currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has moved up 5.5% in the past 60 days.

The company’s expected earnings growth rate for the current and next quarters is 9.5% and 17.6%, respectively. The company has outperformed the broader S&P 500 on a year-to-date basis (+14.6% vs +8.0%). You can see the complete list of today’s Zacks #1 Rank stocks here.

Air Industries Group AIRI is an aerospace and defense company. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has risen 9% over the past 60 days.

The stock’s expected earnings growth for the current year is 81.5%, way higher than the Aerospace - Defense industry’s estimated growth of 10.5%. The company has outpaced the broader industry so far this year (+56.6% vs +19.0%).

Vista Outdoor’s shooting sports segment designs, develops, produces, and sources ammunition and firearms. The stock currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 4% in the past 60 days.

The company’s shares maybe down for the year, but its expected earnings growth rate for the current quarter is a whopping 168.2%, in contrast to the Consumer Products - Discretionary industry’s projected decline of 38.9%.

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Air Industries Group (AIRI) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
American Outdoor Brands Corporation (AOBC) : Free Stock Analysis Report
Sturm, Ruger & Company, Inc. (RGR) : Free Stock Analysis Report
Vista Outdoor Inc. (VSTO) : Free Stock Analysis Report
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