It’s no surprise that defense contractors like Lockheed Martin Corporation (NYSE:LMT) are desperately trying to diversify their business mix. The government is a big customer, but in this age of belt tightening, Lockheed needs to branch out if it wants to survive. The company is doing just that, pursuing a variety of projects outside the realm of government contracts. Today I’ll take a look at three of Lockheed’s diversification efforts. Each project serves as an important step forward, and together they provide three reasons investors should consider buying Lockheed Martin stock.
1. LNG tanks
In March, Lockheed Martin Corporation (NYSE:LMT) announced it was making a $3 million capital investment to develop liquefied natural gas tanks for transportation and storage. The company is using its experience manufacturing tanks for space shuttles to get into the LNG business. The increasing importance of natural gas on a global scale makes this a smart investment for Lockheed. The company has already received initial orders for the tanks, and it expects demand to grow.
Indeed, companies like Chevron (NYSE:CVX) and Cheniere Energy, Inc. (NYSEAMEX:LNG) are both quickly working to finish LNG export facilities in the next two years. At the beginning of this year, the industry was capable of producing 290 million tons per year, and some estimates for LNG see supplies rising 4.5% per year through to 2030.
2. Fusion
Nuclear fusion is an ambitious goal if there ever was one, but that’s exactly what the company is working on at its secretive Skunk Works facility in California. Few specific details are known about the project, but as The New York Times reported last month, the company is aiming to develop small, modular fusion reactors that could be made in factories. If — and this is obviously a big “if” — Lockheed were to reach its goal the development would be nothing short of game-changing.
3. Perforene
The third reason to consider picking up some Lockheed Martin stock is a product called Perforene. It is a thin carbon membrane, called graphene, with perforations about a nanometer big that filters salt from water. The thinness of the filter (it is only one-atom thick) means the energy required to push salt water through the filter is considerably less — 100 times less, according to Lockheed Martin Corporation (NYSE:LMT)– than what is needed for other filtration systems.
The filter is still in its development phase, but Lockheed expects to be able to commercialize it by 2014 or 2015. It would slash the cost of filtering water at a time when world demand for clean water is reaching unprecedented levels.
Foolish takeaway
Tackling the world’s energy problems with forward-thinking ideas is a brilliant strategy for diversifying a business away from government defense contracts. We will always need energy, and increasingly there is money to be made by whoever can develop cleaner energy, or find ways to use less of it. Lockheed is targeting those problems and I think it will pay off down the road. You might say the same for buying Lockheed Martin Corporation (NYSE:LMT) stock.
The article 3 Reasons to Buy Lockheed Martin Stock originally appeared on Fool.com is written by Aimee Duffy.
Fool contributor Aimee Duffy has no position in any stocks mentioned. Click here to see her holdings and a short bio. If you have the energy, follow her on Twitter, where she goes by @TMFDuffy.The Motley Fool recommends Chevron. The Motley Fool owns shares of Lockheed Martin.
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