Motley Fool: Playing defense

Defense specialist Lockheed Martin (NYSE: LMT) has quite a diverse business, including aeronautics (about 40% of sales), rotary and mission systems (25%), space (nearly 19%), and missiles and fire control (the remainder). It’s involved in some of the biggest and most important long-term military contracts around, including the F-35 Joint Strike Fighter and the Patriot missile defense system. These types of programs provide a solid foundation for long-term revenue, even though the company’s top line can wax and wane over shorter periods. The company primarily works for the U.S. government (74% of sales) and its allies (25%).

With a massive recent market value of $95 billion, Lockheed Martin has a scale and reach that’s hard for smaller competitors to match. As such, it can take on big programs, outsourcing work to smaller players. And if those smaller players become important enough, it has the resources to step in and buy them. Generally speaking, this is how the military-industrial complex works, with very large and diversified companies using bolt-on acquisitions to maintain their leadership positions over time.

Lockheed Martin is also looking fairly cheap, with a recent price-to-earnings (P/E) ratio below 16 versus its own five-year average of above 22. Its dividend recently yielded 3.2% – and that dividend has been increased annually for 19 consecutive years. (The Motley Fool has recommended Lockheed Martin.)

Ask the Fool

Q. I’m about to start having a portion of each paycheck automatically invested in an S&P 500 index fund. The stock market might be crashing soon, though – should I wait? – B.N., Gainesville, Florida

A. No. It’s true that the stock market (as measured by the S&P 500) has been on a tear, posting positive returns in nine of the past 10 years, and as of this writing, it’s up double digits in 2021. But a crash might have looked likely a year or two ago, and if you’d waited then, you would have missed out on gains. It’s generally not smart to try to time the market, because no one can know what it will do in the short term (though over most long periods, it has risen).

If you’re worried about where the market is headed, you can make regular investments of equal size over time – also known as “dollar-cost averaging.” That’s what you’ll be doing if your automatic investments are within a company 401(k) account. The same sum will go from your paycheck into investments regularly, so you’ll be buying shares both when they’re lower-priced and when they’re higher-priced.

Q. How can I find out what Social Security benefits to expect in retirement? – F.S., Adrian, Michigan

A. Visit the Social Security Administration website and set up a “my Social Security” account at SSA.gov/myaccount. Then you can pop in anytime to see estimates of your future benefits, based on your earnings record and on when you’ll start collecting your benefits. Delaying the start date will make your checks bigger, but you’ll receive fewer of them – so read up on Social Security strategies to see what makes the most sense for you.

My dumbest investment

My dumbest investment? I bought shares of Starbucks at $8, sold them when they hit $32, and bought a motorcycle. I figured the stock had quadrupled, so there was no way it would go higher, right? – J.N.W., online

The Fool responds: Well, you certainly know what happened: Starbucks shares have recently been trading around $114 per share (after several 2-for-1 stock splits over the years). Your selling may have been perfectly sensible if you really needed to generate cash for the motorcycle, or if you just didn’t see Starbucks growing much more anytime soon. But if you did still believe that Starbucks had a golden future and you didn’t really need the motorcycle, hanging onto the shares would have kept assets in your portfolio that likely would have appreciated further over time. Most motor vehicles, on the other hand, lose value over time.

Starbucks has grown from one store in 1971 to more than 33,800 stores worldwide today, and there’s ample reason to believe it can keep growing. It recently sported more than 5,300 locations in China, for example; that’s far fewer than it has in the U.S. – but China has more than four times the population of the U.S. Meanwhile, the company is having great success with its drive-through and mobile ordering systems and its Starbucks Rewards program, which boasts nearly 25 million members.