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Weekly Roundup November 7 – November 11, 2016: Election Results Significantly Impact Markets

November 7 – November 11, 2016

A Note From Our President & Founder Jim Garrettson

Red was the dominant color all over the electoral map Tuesday night and green has taken over many corners of Wall Street since with defense and other GovCon stocks in particular the focus of investors.

Traders priced in a Republican Congress and Hillary Clinton presidency prior to Tuesday but like the rest of the world woke up shocked to learn that Donald Trump won the White House with a GOP legislature.

Investors immediately repositioned themselves toward equities they view with heightened growth prospects over the next four years and defense is one of the week’s clear winning sectors from whatMotley Fool termed a “Trump Effect.”

A pre-election Bloomberg survey of defense analysts found many expected a military spending uptick regardless of the election’s result but this week’s activity in markets shows the clear bet many are making.

Our GovCon Index of 30 large government contractors that includes many large defense primes has registered two straight record closes Wednesday and Thursday and it appears on track to set a new all-time high again Friday.

All the usual suspects dominated the attention of investors: General Dynamics, Lockheed Martin, Northrop Grumman and Raytheon.

One clear advancer we first noted Wednesday has been the U.S. largest military shipbuilder Huntington Ingalls Industries as traders have seemingly fixated on this company as a beneficiary of the defense spending increase all observers expect.

Defense watcher Loren Thompson pointed to HII in his post-election Forbes column along with shipbuilding competitor General Dynamics as companies to watch in light of Trump’s intention to grow the Navy’s fleet.

Thompson also noted the nuclear modernization effort as an area that could gain traction in a Trump administration and expansion of the Air Force’s fighter jet fleet.

Defense stocks have long traded in a counter-cyclical manner versus other sectors as a “safe haven” in periods of market volatility but this week is the first indicator of a shift away from that mantra.

In other words, The Street’s buying spree foreshadows the impending spending spree.


ScanSource’s Charles Mathis to Join SAIC as EVP, Finance Chief
SAIC CEO Tony Moraco says Mathis brings experience from the technology and financial sectors plus defense to the McLean, Virginia-based contractor.
Orbital ATK Backs Govt Satellite Orders to Help Offset Weak Commercial Market Demand
CEO David Thompson offers Wall Street an outlook of how its satellite order mix between government and commercial customers will evolve over the next three years.
CSRA Tops Street’s 2Q Earnings, Revenue Forecasts
New business awards and expansion of existing work helped the technology services contractor top the consensus analyst outlook.
Vectrus Says Army to Re-Open Bids for Kuwait Logistics Contract, Narrows Earnings Guidance With Revenue Outlook Lift
A GAO decision on a separate programs Vectrus protested is due by Dec. 22 as both contracts represent half of sales over nine months.
AECOM, AWS’ Teresa Carlson Among Winners at 2016 Greater Washington GovCon Awards
AECOM took home the “Contractor of the Year” honor and Carlson received the “Executive of the Year” distinction in the $300 million-plus revenue category.
Matt Desch: SpaceX ‘Back on the Path’ for Iridium Satellite Launch After Rocket Explosion
Iridium’s CEO says he believes the Elon Musk-owned SpaceX outfit remains on track for the first NEXT constellation launch.
Maximus Issues FY 2017 Outlook Falls Below Street Forecasts, Expects Continued Brexit Currency Headwinds
Almost $50 million in impacts from the U.K. pound’s weakening is included in guidance as fourth quarter results topped Wall Street’s forecasts.
Paul Gierow, Roark McDonald Take New Leadership Roles at Cubic’s Mission Solutions Division
San Diego-based Cubic made the pair of appointments within its C4ISR-focused business segment.
PSC Asks Senate to Pass Federal IT System Modernization Bill
David Berteau, the government services trade group’s CEO, requests in a letter the Senate “act promptly” on the bill after the House’s September unanimous approval.
BC Partners, Medina Capital Seek to Add Analytics, Machine Learning Tools to Cyber JV Via Brainspace Purchase
CIA venture capital arm In-Q-Tel invested in Brainspace to help intelligence agencies further adoption of machine learning tools.

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