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Patriot’s Portfolio: From Northrop Grumman to Devon Energy, Google

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My family and I traditionally mark Memorial Day with a visit to the national cemetery to pay our respects to veterans of our nation’s wars. On the car ride over the kids hear my sermon on the historic exceptionalism of the United States; the greatness of our Founders; the freedom and tolerance that uniquely took root here; and the sacrifices of those who risked or gave their lives so that we can enjoy all these blessings of liberty.

I regret that to many Memorial Day has been reduced to the mere start of the summer vacation season, kicked off by barbecues and recreational activities. The feasting and enjoyment are appropriate — if they are accompanied by some acknowledgement of the price that has been paid to afford us our freedom and comfort.

To that end, I thought I’d mark the holiday with something different from the kind of investment trends analysis you might typically see in this space, and instead offer a few ideas for a “patriot’s portfolio” of companies that contribute to a strengthening our country.

The core of any such portfolio would have to consist of defense companies. Ironically, this is the one category that is universally ruled out by the so-called “socially responsible investing” movement. While it is easy to preen about one’s moral superiority because you don’t sully yourself with weapons of war, those who remain in possession of their common sense understand the difference between weapons controlled by Churchill and FDR and those controlled by Hitler.

For starters, our patriotic portfolio might contain United Technologies (UTX), which makes the Black Hawk helicopters that carried our Navy Seals to greet Osama bin Laden for the last time; Lockheed Martin (LMT), which makes the stealth warplanes that have become an important war fighting advantage in recent conflicts; and Northrop Grumman (NOC), whose radar, sensors and night vision goggles all ensure there will be no new bin Laden birthday celebrations.

Our soldiers are defending our liberties, foremost of which is our freedom of speech. While there are numerous media companies, a case can be made that the modern Guttenberg is actually Google (GOOG).

Not everyone can afford to start his own newspaper, but anyone can start a blog, at no cost, on Google’s Blogger platform, and its Droid format further democratizes the flow of information by allowing anyone with a cell phone to film and comment on live events. Apple (AAPL) is another company whose products have similarly empowered the average citizen.

All these brilliant ideas in weaponry and communications flow from a creative and educated people. But our established education system is not working well. Just as new media companies are leapfrogging the established ones, new education companies are emerging to challenge the dominance of our large universities.

A whole generation is graduating from college laden with expensive loans and little prospect of a decent job. To that end, new companies like Bridgepoint Education (BPI) that promote access to a practical education through online learning are likely ushering in a wave of the future.

I know next to nothing about this company, and I don’t think anyone confuses its offerings with those of MIT. Rather, it competes with community colleges. But companies like BPI will bring pressure on the excessively high cost of a college education and likely foster scaled down online options from traditional brick and ivory institutions. More competition, on price and quality, are all to the good.

Because this article has (so far) been based on non-investment criteria, I thought I’d name one company that has more of a traditional financial justification. The idea comes from Sunjay Gorawara, a senior at Indiana University who will take a job as an analyst at JP Morgan his graduation.

Gorawara won the prestigious Ira Sohn Investment Conference contest, an annual event where famed investors like Michael Price, David Einhorn and Seth Klarman choose one wannabe hedge fund manager to address professional investors with his best investment idea. Gorawara expects BPI to more than double within 12 months.

Our patriot portfolio should also contain shale gas stocks, both exploration and oil field service companies. Devon Energy Corporation (DVN), Chesapeake Energy Corporation (CHK) and Kinder Morgan Energy Partners (SWN) will help remove the strangle grip foreign oil suppliers have on our economy.

To balance out all these market-cap-heavy holdings, the portfolio should include a heavy dose of small U.S. companies across a wide range of industries that help build our economy and society. Rydex S&P SmallCap 600 Pure Value ETF(RZV) has got a low average market cap and its strong value bias should hold up better in a market whose valuations have been steadily on the rise.

International diversification is also important to a patriot portfolio. The iShares MSCI Israel (EIS), S&P India Nifty Fifty (INDY) and GlobalX InterBolsa FTSE Colombia 20 (GXG) provide access to markets of reliable allies whose stocks do not sync with America’s to as great an extent as, say, Canada’s or Australia’s do.

This “patriot’s portfolio” is merely a sketch of the kind of portfolio you can think about developing on your own. The marketplace is a large arena, but not a morally neutral one. Some companies greatly add to the quality of our society while some bring it down. Finding a portfolio that matches the contributions of our soldiers, sailors, Marines, Coast Guard and airmen would seem to be a task worth investing in.


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