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Stifel says Defense stocks near bottom, Raytheon attractive

In a note to investors earlier today, research firm Stifel Nicolaus said that defense stocks are generally near their bottom. The firm thinks that the group could underperform over the next year, but it adds that such weakness would create attractive long-term buying opportunities. Stifel expects Congress to reach a compromise early next year that will reduce defense budgets from current levels, but the firm expects the cuts to be less steep than those mandated by sequestration. The firm resumed coverage of Raytheon (RTN) with a $63 target and Buy rating. Raytheon's large international business, its 3.6% dividend yield, and its relatively undersized exposure to big ticket items make it more attractive than its peers, says Stifel. On the other hand, the firm resumed coverage of Lockheed Martin (LMT), General Dynamics (GD), Northrop Grumman (NOC) and L-3 Communications (LLL) with Hold ratings, as Stifel recommends waiting for those stocks to reach better entry points before buying them.