Are there type of companies to avoid investing in?  Are there whole categories to skip when looking for stocks to buy? 

Military Stocks

The easiest group of companies to evaluate is those that depend on sales to the military.  

While support of our military is essential to preserving our freedom, whether that translates into profitability for their stockholders is a separate question.  

There are periods of time when buying military stocks can be a good choice.  As a general rule (i.e., with exceptions), military stocks have not done well during the Biden Administration.  

That should not be a big surprise if you have kept an eye on news of Biden’s military endeavors:  there are almost none.  Contracts put into place by the previous President have clearly not been maintained.

Northrup-Grumman (symbol “NOC”) is a case in point.  Through 2022, Northrup-Grumman’s stock experienced a steady upward trend.  But since the big fall-off in late 2022 at the beginning of the recession, changes to Northrup-Grumman stock have been minimal.  From an investor’s standpoint, the stock’s price has been virtually unchanged.

Similarly, Raytheon (symbol “RTX”) has also been an unimpressive stock, bouncing up and down within a fairly narrow range.  

One attraction, however, is the assurance that the Department of Defense will certainly be doing business with defense companies, which means the existence of those companies – and your investment in them – for the foreseeable future is guaranteed.

Dividend yields on defense stocks tend to be a contributing factor in deciding to buy stocks in this category.  Northrup-Grumman’s dividend yield is 1.60%.  Raytheon’s dividend yield is 2.47%.

Aviation Stocks

Boeing has likewise been in a holding pattern starting early in 2020.  Boeing suffers a double-whammy:  it is a defense stock and it is a maker of commercial jets.  Recently, its failure to maintain good safety standards for its airplane has hurt the stock’s performance as well.

Is Boeing likely to recover anytime soon?  Its prime competitor, Airbus, is developing a new airplane.  “New” in the commercial aviation world currently translates into being more fuel-efficient and more aerodynamic.  Boeing insists that its continual evolution and refinement of existing models is the right call.

That appears to be incorrect, but is it?  Time will tell.

Airbus built its A380 super-jumbo jet a decade ago.  Boeing dropped out of the super-jumbo race, saying the patterns of world air travel did not call for super-jumbos.

Boeing was right.  Airbus 380 production shut down several years ago.  Financially, the A380 was a money-loser, never selling enough to make up the cost of designing and building it.  

Is Boeing’s current decision to continue the refinement of current models also the right one?  

Perhaps; but safety is also an issue.  There is no doubt in anyone’s mind that Boeing must fix its safety problems.

If Boeing’s stock is in the doldrums, how is Airbus stock doing?  

Since 2018, Airbus stock (symbol “EADSY”) has also been a mediocre investment.  However, in the last month or so, the stock may reflect the fact that Airbus jets are a good alternative to Boeing jets.  The stock’s price seems to have broken through its multi-year ceiling.

Buying aviation-oriented stocks has always tended to be a gamble.  Airplane manufacturing has historically gone through regular boom-and-bust cycles.  Both Boeing and Airbus say that has changed.

AT&T

AT&T (stock symbol “T”) deserves special mention.  AT&T has always been considered the mainstay stock of widows – not an exciting performance, but strong on dividends.  

Unfortunately, AT&T’s stock has been on a slow decline for the past nine years – since 2015.  AT&T’s stock price is now at the same level as it was in 1990-1995.  The P/E is down at 8.62 – half of the recognized typical P/E average (see last month’s Investors Column).

Do the widows care?

The stock’ annual dividend yield is at 6.54%.  Compare that to Apple’s 0.56%, Microsoft’s 0.70%, or Master Card’s 0.55%.  

If a widow has several hundred thousand dollars of AT&T stock, getting dividends totaling 6.54% of that amount each year with no effort or financial worry looks pretty good.  

Oil companies

Exxon Mobil’s stock (symbol “XOM”) price has stayed fairly level for the past two years.  Its dividend yield is at 3.35%.  That is not as good as AT&T, but with oil supposedly fading as a major energy source, dividends may have become what the investors of oil companies are pursuing.

The performance of Chevron stock (symbol “CVX”) has pretty much paralleled that of Exxon Mobil.  Its dividend yield is at 4.22%, substantiating the idea that oil stock purchases are being made by investors looking for a safe haven for their money, with steady income.

The stock of Schlumberger (symbol “SLB”), a company mainly involved in drilling oil wells, has similarly had a lackluster performance since 2022.  There dividend yield is at 2.04% - not as much as Exxon Mobil or Chevron, but Schlumberger’s stock usually has a more varied performance than those rock-steady monoliths.  The stock’s performance reflects the company’s successes at wining drilling contracts and opening new oil wells.

Choices, choices, choices

Not all companies want their stocks to compete with the wild times of the hi-tech stocks.

The stocks presented here may or may not be attractive to you as an investor.  Every investor must decide what his goals and purpose are for being an investor; he must find his niche – the place he most enjoys being as an investor, the place where he is most comfortable investing his money, and ultimately, where he is most successful.  

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