Safe to get involved? Heck, we're all out of safe and sound positions these days. That said, the merged company (a Trifecta Stocks holding) that was United Technologies ( (UTX) now RTX) and Raytheon ( (RTN) now RTX), less well known spin-offs Otis Worldwide (OTIS), and Carrier Global (CARR) that will be known from this point forward as Raytheon Technologies (RTX) may be interesting. At least to this trader with a long history of investing in defense and aerospace. I had been long United Technologies earlier this year. I had been long the old Raytheon last year. That one had historically been a Sarge fave over a number of years. Staying out of both names as the need to run a very narrow book in response to an economy collapsing by mandate has been difficult. In fact, staying out of defense and aerospace (with the exception of Lockheed Martin (LMT) ) has been difficult. That said, there's a good chance that this name will quickly become Sarge's second favorite name in the space.
Open For Business
The merged firm opened for trading on Friday morning at an even $51 and has not really been all that volatile since, as traders try to place a value on the name, as well as the non-defense, non-aerospace spin-offs all of whom will land in the S&P 500 by Monday's opening bell. RTX will be a firm of 195k employees with a focus on the defense business. From the UTX side comes an array of defense related electronics work, as well as engine manufacturer Pratt & Whitney. From the old Raytheon, we're talking missile systems, missile defense, hyper-sonic weaponry, intelligence, surveillance and reconnaissance. If you haven't guessed. I like what Raytheon provides. I always have. The business had just become difficult to invest in once the merger had been announced.
You've heard the names. Sidewinder, TOW, Tomahawk, Javelin, Patriot... all missiles. All Raytheon. Fighter planes? The F-15 Eagle, F-16 Falcon, F/A-18 Hornet, F-22 Raptor... all rely on radar developed by Raytheon. The firm is also heavily involved with several other large defense contractors in the fields of Satellite sensors used for tracking and surveillance, unmanned aerial systems, radio and digital communications, and radioactive materials detection. I mean, what's not to like?
My Thoughts
Well, I can not really provide a useful chart, as this is day one of trading for a vastly changed company (companies). I do know this. This firm will be a dominant player in its field along with the likes of Lockheed, Northrop Grumman (NOC) , General Dynamics (GD) , and the much beleaguered Boeing (BA) . The risk, and it may not be a risk, will be in the level of fiscal spending that will be required for the U.S. and U.S. allies to fight the Covid-19 fight and then restart their economies, which at that point will be far smaller.
There would be a school of thought that as cuts to federal spending will have to be made across the realm of the discretionary, just what will be termed discretionary? For that reason, as I do not think that the U.S. will anytime soon truly embrace the concept of austerity in response to what will be truly frightening budget deficits, there is no telling how many U.S. client nations who will be in that same boat will tackle that issue.
So, there is risk. Even if the U.S. should decide that military readiness remains a priority, it is probably safe to say that globally, defense will be a concern secondary in nature for many nations.
What I Am Going To Do
After this piece hits publication, it is likely, heck its not just likely... I am going to initiate a long position in Raytheon Technologies (RTX) before the Friday afternoon closing bell. My entry will be at least 1/16, but not more than 1/8 of what I am willing to invest in this name. That said, I desperately need to broaden my exposure to defense, and I do like this name.
