In this article, we discuss the 10 war stocks that U.S. House Members have huge stakes in. If you want to read about some war stocks popular in the House, go directly to U.S. House Members Have Huge Stakes in These 5 War Stocks.
Members of the United States Congress are mandated under the Stop Trading on Congressional Knowledge Act of 2012, more commonly known as the STOCK Act, to regularly disclose their stock trading activities. The law was passed to ensure more transparency with regards to US politicians making use of insider information to trade stocks. However, per a recent disclosure by Business Insider, many lawmakers have failed to properly disclose their financial trades in the past few months as required by the STOCK Act.
Under the terms of the Act, US politicians are required to disclose their stock trading activities and that of their families, publicly and within a designated time after transactions. According to the news outlet, close to 60 lawmakers have flouted these rules, citing “ignorance of the law, clerical errors, and mistakes by an accountant” to explain delays to filings. These members are fined around $200 for these mistakes. This has led to calls for stricter penalties and even a complete ban on stock trading for lawmakers.
This debate has assumed increased urgency in light of the war in Ukraine and the activities of US lawmakers around war stocks in the past few months. Some of the top war stocks in the US House of Representatives’ portfolios include Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC), and General Dynamics Corporation (NYSE:GD), among others discussed in detail below.
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Our Methodology
The companies listed below were picked from the Periodic Transaction Report(s) that US House members who trade stocks are obliged to file. House members who traded defense stocks feature on the list.
It is important to clarify that the companies listed below were picked from the public record of investments US House members and their families have made in the past few months. The purchases may not have been made by the House members themselves but only disclosed on behalf of their families.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
U.S. House Members Have Huge Stakes in These War Stocks
10. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 51
Honeywell International Inc. (NASDAQ:HON) is a diversified technology and defense manufacturing firm. It is one of the top defense stocks in the hedge fund industry. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Honeywell International Inc. (NASDAQ:HON) with 1.6 million shares worth more than $342 million.
On March 10, US House member Ronald Estes disclosed a purchase of Honeywell International Inc. (NASDAQ:HON) stock worth around $15,000 to $50,000. The transaction in this regard took place five days before the mandatory filing.
Just like Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC), and General Dynamics Corporation (NYSE:GD), Honeywell International Inc. (NASDAQ:HON) is one of the war stocks popular among US House members.
In its Q3 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Honeywell International Inc. (NASDAQ:HON) was one of them. Here is what the fund said:
“The largest exited positions were Oracle, which outperformed significantly, and Texas Instruments and Honeywell International Inc. (NASDAQ:HON), which were roughly flat versus the market in the quarter but were edged out for inclusion by other stocks that became even more attractively valued.”
9. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 50
The Boeing Company (NYSE:BA) markets military aircraft, satellites, and missile defense systems. In late 2021, US House member Thomas Suozzi revealed a purchase of the stock of the aviation giant worth somewhere around $15,000 to $50,000.
Elite hedge funds hold large stakes in The Boeing Company (NYSE:BA). At the end of the fourth quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in The Boeing Company (NYSE:BA), the same as in the preceding quarter worth $1.4 billion.
In its Q1 2020 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and The Boeing Company (NYSE:BA) was one of them. Here is what the fund said:
“We’ve known The Boeing Company (NYSE:BA) for a long time. It’s always been a high quality company that’s traded for a premium valuation owing to its position as a global duopoly. We’d looked at it recently after weakness due to its highly publicized Max 737 issues, but it never got cheap enough for us to pull the trigger. After the pandemic, the stock went into freefall as its customer bases’ business dried up and people worried about its liquidity. The stock fell from $338 on February 19th when the S&P hit its high to a low of $89. We bought the stock after the new CEO Dave Calhoun said publicly that it would not take government capital if it required equity dilution because it had many other options. Our average price is just above $120 where it was trading for less than 7x what it earned in 2018. It will likely take a while to normalize to those earnings levels, but this business will survive and ultimately we will own a leader in a global duopoly. Even on depressed forecasts, the company currently has about a 10-15% free cash flow yield. If and when the economy normalizes, we think The Boeing Company (NYSE:BA) could be worth more than double its current price.”
8. Raytheon Technologies Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 50
Raytheon Technologies Corporation (NYSE:RTX) operates as an aerospace and defense firm. Hedge funds have been piling into Raytheon Technologies Corporation (NYSE:RTX) stock in recent months. At the end of the fourth quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in Raytheon Technologies Corporation (NYSE:RTX), compared to 48 in the preceding quarter worth $2.2 billion.
On March 17, US House member John Rutherford disclosed a purchase of Raytheon Technologies Corporation (NYSE:RTX) stock worth somewhere around $1,000 to $15,000. The actual purchase took place in late February.
In its Q3 2021 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Raytheon Technologies Corporation (NYSE:RTX) was one of them. Here is what the fund said:
“In the industrial space, we own a select list of well-entrenched market leaders, such as Raytheon Technologies Corporation (NYSE:RTX) in aerospace. These have recovered this year from their lulls in 2020, yet continue to trade at reasonable multiples of subdued earnings, creating a potential setup for the double play of recovering multiples on recovering earnings.”
7. Leidos Holdings, Inc. (NYSE:LDOS)
Number of Hedge Fund Holders: 28
HoLeidos Holdings, Inc. (NYSE:LDOS) provides provides research and consulting services to the defense industry. On February 9, US House member Rohit Khanna purchased a stake in the company worth somewhere around $1,000 to $15,000. The transfer of money in this context took place in late January.
Leidos Holdings, Inc. (NYSE:LDOS) remains one of the top defense stocks in the finance world. At the end of the fourth quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $183 million in Leidos Holdings, Inc. (NYSE:LDOS), compared to 14 in the preceding quarter worth $206 million.
6. BWX Technologies, Inc. (NYSE:BWXT)
Number of Hedge Fund Holders: 26
BWX Technologies, Inc. (NYSE:BWXT) makes and sells nuclear components. Top hedge funds hold bullish positions in the stock. Among the hedge funds being tracked by Insider Monkey, Wisconsin-based investment firm Cardinal Capital is a leading shareholder in BWX Technologies, Inc. (NYSE:BWXT) with 1.6 million shares worth more than $79 million.
On January 17, US House member Lois Frankel disclosed a purchase of BWX Technologies, Inc. (NYSE:BWXT) stock worth somewhere around $1,000 to $15,000. The actual trade took place in late December.
Along with Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC), and General Dynamics Corporation (NYSE:GD), BWX Technologies, Inc. (NYSE:BWXT) is one of the war stocks that US House members hold huge stakes in.
In its Q3 2021 investor letter, Upslope Capital Management, an asset management firm, highlighted a few stocks and BWX Technologies, Inc. (NYSE:BWXT) was one of them. Here is what the fund said:
“BWX Technologies, Inc. (NYSE:BWXT) designs and produces nuclear reactors, components and fuel, primarily for the U.S. Government and Navy (and, more recently, NASA). The company is the sole supplier for its Naval products (~75% of sales), which are used for the power and propulsion of all of the Navy’s aircraft carriers and submarines. With nuclear subs (aka “boomers”) forming the backbone of the “Sea” leg of the Nuclear Triad, BWX plays a vital and sensitive role supporting the national security of the United States. Of course, BWX is exceptionally well-positioned should the saber-rattling vis-à-vis China continue. The recent Aukus security pact, which may eventually benefit BWX, illustrates the urgent and strategic importance of maintaining a modern nuclear-powered sub fleet.
Even if relations with China stabilize (and hopefully they do), BWX Technologies, Inc. (NYSE:BWXT) shares seem poised to outperform. After four years of essentially going nowhere, the stock currently trades near the low-end of its historical valuation range – just over 13x EBITDA vs. typical range of 13-16x. With a literal monopoly position (albeit against a sole purchaser), BWX has historically generated modest top-line growth with attractive returns on capital (mid-20s). Given the stability of the business and its competitive position, as well as the current geopolitical backdrop, current valuation seems very reasonable.
Importantly, beginning in 2017 BWX Technologies, Inc. (NYSE:BWXT) embarked on an aggressive capex expansion program, eventually tripling capex as a percentage of sales. In addition to ramping capacity to support Navy growth, BWX spent heavily developing its medical/radioisotope business. While not yet concluded, there is light at the end of the tunnel that should bode well for shares. 2020 appears to have been the capex peak and BWX seems on track for more normalized capex by the end of 2022. This should lead to de-levering the balance sheet (from an already-reasonable 3x gross debt/EBITDA), a potential acceleration in capital returned to shareholders, and/or the prospect of increased M&A.
Lastly, while BWX’s core today is its Naval operations, there is long-term optionality from the other units (~25% of revenue), which are currently focused on Canadian nuclear power (fuel and components), medical, space (NASA) power, and microreactors. BWX faces little competition, if any, across many of these areas. A sizable portion (>50%) of the recent capex program was also invested in a new Mo-99/Tc99 radioisotope (essentially a cleaner, more cost efficient alternative to current products on market – used in cardiology, oncology, neurology, and diagnostics) production line that should lead to an acceleration in growth outside of Naval operations.
Major risk factors for BWX Technologies, Inc. (NYSE:BWXT) include the possibility of physical accidents, production defects and resulting liabilities, as well as cost pressures due to strained government budgets and/or rising input costs, some leverage (~2x net), and ESG flow headwinds (not fundamental, of course, but a reality).”
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Disclosure. None. U.S. House Members Have Huge Stakes in These 10 War Stocks is originally published on Insider Monkey.
