Our Favorite Defense Stock to Buy Has Transitioned into a Tech Juggernaut

If you’ve been following our recommendations over the years, you should beam over The Boeing Co. (NYSE: BA) stock. Since the election in November 2016, shares of this defense stock are up 158%, absolutely crushing the market.

Here’s an eye-opener for you – Amazon.com Inc. (Nasdaq: AMZN) is up “only” 126% over that same span. Over the past five years, Boeing stock is up a whopping 248%.

Of course, Boeing’s reputation took a big hit in April when a passenger was tragically killed in one of its airplanes. An engine failed on a Southwest Airlines Co. (NYSE: LUV) flight, leading to the horrific accident.

Predictably, investors reacted in a negative way. But Money Morning Defense and Tech Specialist Michael A. Robinson said that turning away from Boeing would be a big mistake.

In his recent report, he made it clear the accident was a wake-up call for airlines and the manufacturers. Indeed, passengers who typically dismiss the safety warnings given before takeoff started to pay closer attention. A photo taken by a passenger on that doomed flight showed other passengers using their safety masks incorrectly. (Money Morning Executive Editor Bill Patalon also addressed this tragedy here.)

However, everyone should take note that flying in the United States is still one of the safest ways to travel. The U.S. Department of Transportation’s Bureau of Transportation Statistics reported that domestic passenger traffic reached 741.6 million in 2017. As tragic as it is to lose one life – the first one since 2009 – the safety record here is still excellent.

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Boeing itself felt the pressure from the accident, as well as news of a possible trade war with China. But within days, the company reported record earnings from aviation and growth in defense spending.

In the last month alone, this defense stock is up another 5.8%.

And demand remains incredibly strong. The company said it needs to build over 41,000 planes over the next two decades to keep up with that demand. That’s a bonanza of over $6.1 trillion.

A lot of that will be fueled by growth in Asia, thanks to a booming middle class.

But that’s not the only catalyst for Boeing stock. You see, this aerospace and defense company has transitioned itself into a full-fledged tech juggernaut…

This Defense Stock Has Become the Best Kept Secret in Tech

While everyone knows Boeing is one of the top producers of airplanes in the world, they may not fully understand that it’s also one of the top suppliers to the Pentagon. That puts it in the sweet spot as Washington looks to beef up the military.

The Boeing DefenseSpace & Security division is a leading provider of jet fighters, helicopters, and, more recently, airborne drones. This division has brought in $70 billion in sales over the past five years.

Boeing’s AH-64 Apache, for example, is the world’s most advanced multirole combat helicopter.

You’ve also probably heard of the B-52 bomber and F/A 18 Super Hornet fighter. Yep, both Boeing’s.

And not to be left out, the company bolstered its drone effort with the October 2107 purchase of Aurora Flights Sciences Corp.

But the more mundane is not forgotten, either. The company is pushing into cargo air vehicles and even aircraft servicing.

If you thought tech stocks only came from Silicon Valley, think again. With its efforts in aviation, military, drones, passenger travel, cargo delivery, and even troop travel, you can bet Boeing will be on top for decades to come.

And if that were not cool enough, Boeing was NASA’s primary contractor to develop and build the International Space Station (ISS). Even today, its space division continues to provide engineering and management under extended contracts. Why is this important? Because Washington is also thinking about privatizing the operations of the ISS.

Boeing’s financials aren’t bad, either. After leading the Dow Jones Industrial Average higher last year, Wall Street thinks there is plenty left to go. For example, Cowen and Co. has a $430 price target on the stock (it closed at $360.10 Tuesday), calling it undervalued.

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You Won’t Believe Which Tech Giants Amazon’s Set to Destroy

Amazon (Nasdaq: AMZN) and Apple (Nasdaq: AAPL) are perhaps the world’s two best-known companies. The two firms have been dominant, sweeping aside much of their competition.

But what happens when these companies decide to enter the space that is thought to be dominated by the likes of Alphabet (Nasdaq: GOOG)Facebook (Nasdaq: FB) and Tesla (Nasdaq: TSLA)? As the late, great sports broadcaster Keith Jackson would say, “Whoa, Nellie!”

Things are about to get real interesting…

Amazon Goes Big Into Advertising

Amazon has entered just about every sector there is, so why not advertising too? It is taking its most aggressive step yet into self-serve programmatic digital ads by testing a new display ad offering that takes aim squarely at the multi-billion dollar ad revenue stream of Google and Facebook. Google brought in $95 billion from all ads last year, and UBS estimates its display ad network alone will reach $38 billion in revenue this year. Facebook took in $40 billion from ads in 2017.

Amazon’s tool permits merchants that sell on its marketplace to purchase ad spots that will follow customers around the web (the ads will appear on other websites and apps) to try and lure them back to Amazon to make purchases. Amazon is inviting a few select merchants to try the new ad system, beginning in May.

It plans to spend the next year aggressively expanding the infrastructure that it hopes will get more brands buying ad space on its websites and through its ad platform. To do so, Amazon will work with ad-tech companies, agencies and media firms to create platforms that will make buying Amazon ads as easy as using an online shopping cart.

The company has already been using its ads business to boost revenue, helping it get a bigger slice of transactions on its site. Its ad business generated $1.7 billion in revenues last year, according to the research firm EMarketer.

Related: Sell These Healthcare Stocks Before Amazon’s Doctor Starts Making House Calls

However, the ability to programmatically buy ads on Amazon should be a game changer. EMarketer had forecast that, in 2018, Amazon would generate $3.7 billion in ad revenue worldwide. But in the first quarter of 2018, Amazon already reported more than $2 billion in its ad business: that more than doubled year on year. Its CFO, Brian Olsavsky, said in the first quarter conference call “Advertising continues to be a bright spot from a product standpoint and also a financial one.” Olsavsky added that advertising was a “strong contributor to profitability”.

This aggressive move into the ad space is a smart one for Amazon. First, it is more profitable than just selling things online. Especially since many people actually come to Amazon with the intention of shopping, which is unlike Google and Facebook, where people just do browsing usually.

Second, the digital ad business is big and getting bigger. By 2021, advertising on websites and mobile devices will account for half of all ad spending in the United States, capturing a greater market share than television, radio, newspapers and billboards combined, according to an estimate from EMarketer.

And while most on Wall Street do not see Amazon as a threat to Google and Facebook, I do. First, never underestimate Jeff Bezos. I believe Amazon’s ad business will pull in $10 billion in revenues this year. That is almost half the size of its cloud business, Amazon Web Services.

Second, Amazon comes from a position of strength, with more than 40% of the e-commerce business in the U.S. Both Google and Facebook are bit players there, which gives Amazon a distinct advantage because it has more data on what consumers buy than any other platform. That should drive more business toward Amazon and away from Google and Facebook.

Related: Sell These 3 Stocks as Amazon Takes Over Banking

Now, let me fill you in on some interesting happenings at Apple, which is also taking aim at fellow technology giants.

Apple and Autonomous Driving

Some on Wall Street are disappointed that Apple has toned down its ambitions with regard to self-driving vehicles, called ‘Project Titan’.

I am not… it’s not easy building cars… just ask Elon Musk and Tesla.

Instead, Apple is focusing on providing software to vehicle makers to give riders an ‘Apple experience’. It is working currently with a subsidiary of the German automaker Volkswagen (Italdesign, a unit of Lamborghini)to transform about two dozen T6 Transporter vans into electric self-driving shuttles.

That’s not all Apple is doing. It was revealed last month that Apple now has the second-biggest fleet (55) of autonomous vehicles that is being tested on California roads. Apple’s testing fleet has expanded rapidly in recent months. After first receiving a permit to test just three autonomous vehicles in April 2017, the number of vehicles jumped to 27 in January. It has more than doubled since then to 55 vehicles. That leaves Apple second only to General Motors Cruise, which has 110 cars testing on California’s roads.

The Wall Street critics say so what… it is still far below the overall fleet of Google’s Waymo and Uber. But as usual, they are missing the big picture. Apple’s autonomous driving program is another addition to its rapidly growing services business, which is moving Apple away from its reliance on sales of iPhones.

Apple’s software and services segment which includes the App Store, Apple Care, Apple Pay, iTunes and cloud services has been a particular growth point for Apple in recent years. CEO Tim Cook knows his firm is too dependent on hardware. In January 2017, he said that he hoped to double revenue from the services segment ($7.17 billion at the time) by 2020. In its latest quarter, Apple reported a 31% year-over-year increase in the segment’s revenue to $9.2 billion.

I’m in agreement with a recent note from Morgan Stanley that said Wall Street is undervaluing Apple’s services business that includes healthcare, augmented reality and original content too. It predicted the company’s services business will represent 67% of Apple’s sale growth over the next five years.

Apple had been leaving money on the table in recent years by failing to capitalize on the rapidly-growing subscription economy. So what better way to play catch-up than a self-driving software play that it can sell to any number of automakers?

And while it is far too early to declare the winners in the race for autonomous driving technologies, I would not count out Apple. It, like Amazon, has an uncanny knack for coming out on top.


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