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5 Aerospace and Defense Stocks to Celebrate Blue Origin's Space Launch

Aerospace and defense stocks meeting Ben Graham's Lost Formula

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James Li
Oct 13, 2021

Summary

  • Jeff Bezos’ Blue Origin followed its July spaceflight mission with a second launch.
  • 'Star Trek' actor William Shatner sets new record for the oldest person to travel to space.
  • Investors can find opportunities in aerospace and defense stocks meeting Ben Graham’s Lost Formula of 1976.
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In light of Jeff Bezos’ Blue Origin completing another historic space launch, five aerospace and defense stocks with high financial strength that meet Ben Graham’s lost formula of 1976 are Woodward Inc. (

WWD, Financial), Mercury Systems Inc. (MRCY, Financial), AeroVironment Inc. (AVAV, Financial), AAR Corp. (AIR, Financial) and Smith & Wesson Brands Inc. (SWBI, Financial), according to the All-in-One Screener, a Premium feature of GuruFocus.

Historic space launch builds on July spaceflight mission

Following Blue Origin’s first crewed spaceflight in July, Bezos’ space company launched its New Shepard rocket a second time on Wednesday, carrying a crew of four people that included Canadian actor William Shatner. Shatner, who played Captain Kirk in the original “Star Trek” series, set a new record for the oldest person to travel to space at 90 years old.

Bezos’ Blue Origin competes with other companies like Richard Branson’s Virgin Galactic Holdings Inc. (

SPCE, Financial) and Tesla Inc. (TSLA, Financial) CEO Elon Musk’s SpaceX.

As people cheer on progress in space travel, investors may find opportunities in aerospace and defense companies that have high financial strength and meet Ben Graham’s lost formula of 1976. Prior to his passing, the legendary investor developed two iterations of his formula, which included criteria like low price to net asset value multiples and high equity-to-asset ratios. GuruFocus’ All-in-One Screener listed five aerospace and defense companies that have high financial strength, a price-book ratio less than 4 and an equity-to-asset ratio of at least 0.5.

According to the Industry Overview pages, the top 20 aerospace and defense companies have a mean price-book ratio of 5.23.

Woodward

Shares of Woodward Inc. (

WWD, Financial) traded around $115.02, approximately 3.32 times its book value per share.

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GuruFocus ranks the Fort Collins, Colorado-based energy control and optimization solutions company’s profitability 8 out of 10 on several positive investing signs, which include a five-star business predictability rank and profit margins and returns outperforming more than 70% of global competitors.

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Gurus with holdings in Woodward include

Chuck Royce (Trades, Portfolio)’s Royce Investment Partners and Mario Gabelli (Trades, Portfolio)’s GAMCO Investors Inc. (GBL, Financial).

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Mercury Systems

Shares of Mercury Systems (

MRCY, Financial) traded around $49.33, approximately 1.84 times its book value per share. The stock trades at a price-book ratio near a five-year low and is signficantly undervalued based on Wednesday’s price-to-GF-Value ratio of 0.55.

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GuruFocus ranks the Andover, Massachusetts-based commercial technology company’s financial strength 7 out of 10 on several positive investing signs, which include a high Altman Z-score of 4.74 and interest coverage and equity-to-asset ratios outperforming more than 84% of global competitors.

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AeroVironment

Shares of AeroVironment (

AVAV, Financial) traded around $88.60, approximately 3.67 times its book value per share. The stock trades at a price-book ratio near a one-year low and is fairly valued based on Wednesday’s price-to-GF-Value ratio of 0.95.

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GuruFocus ranks the Arlington, Virginia-based company’s financial strength 6 out of 10 on the heels of a strong Altman Z-score of 5.6 and an equity-to-asset ratio that outperforms more than 73% of global competitors despite having a low Piotroski F-score of 3.

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AAR Corp

Shares of AAR Corp. (

AIR, Financial) traded around $33.35, approximately 1.20 times its book value per share. The stock is fairly valued based on Wednesday’s price-to-GF-Value ratio of 0.98.

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GuruFocus ranks the Wood Dale, Illinois-based company’s financial strength 6 out of 10 on the heels of a high Piotroski F-score of 7, a strong Altman Z-score of 3.8 and equity-to-asset ratios outperforming more than 70% of global competitors.

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Despite good financial strength, profit margins and returns outperform just over half of global competitors.

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Smith & Wesson

Shares of Smith & Wesson (

SWBI, Financial) traded around $21.04, approximately 3.37 times its book value per share. The stock trades at a price-book ratio near a one-year low and is fairly valued based on Wednesday’s price-to-GF-Value ratio of 0.97.

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GuruFocus ranks the Springfield, Massachusetts-based company’s financial strength 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 9, a strong Altman Z-score of 9.38 and an interest coverage ratio that outperforms more than 88% of global competitors.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com
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