In this increasingly overvalued market, it is difficult to find stocks trading at decent valuations. There are still a few pockets of value here and there in some sectors with utilities and healthcare. But there are also isolated stocks that are trading at reasonable valuations. Some of these stocks have low expectations due to the adverse effects of COVID-19. But with rising vaccination rates I expect 2021 to be better than some investors expect for these companies. One such company is L3Harris Technologies (LHX). The company focuses on mission-critical communications, sensors, payloads, networking, avionics, and other products mostly for the U.S. military as opposed to major platforms. However, this has translated into long-term top and bottom-line growth that in turn has translated into long-term dividend growth. The stock is a Dividend Contender with a very safe dividend. There are four reasons including market leadership and margins that I outline below about why I view L3Harris as a long-term buy.
L3Harris Is A Market Leader In C4ISR
Increasing consolidation in the defense industry has resulted in few very large companies with market dominance. Furthermore, most companies are specializing in certain platforms or technologies. L3Harris does not focus on major platforms rather the company focuses on command, control, communications, intelligence, surveillance, and reconnaissance or C4ISR. The company has strong business in communications, sensors, electronic warfare, microwave devices, and avionics (military and commercial). The products designed and manufactured by L3Harris often end up in airborne or space platforms including the F-35, F-18, P-8, F-16, Apache, UAVs, and other aircraft. The defense contractor also produces content for ships, submarines, and land vehicles. L3Harris also manages the FAA’s communication systems and conducts training.
The combination of technical expertise, classified workforce, and incumbency in many technologies gives L3Harris a wide moat. It would be difficult for any new entrant to recreate one of the above three but to recreate all three would be much more difficult…
Disclosure: Long LHX
Please read the complete article at my profile on Seeking Alpha for L3Harris: Market Leadership And Margins Mean Buy.
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.