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How to Profit from North Korea with Nuclear Missiles

Companies / Investing 2013 Apr 15, 2013 - 10:37 AM GMT

By: Money_Morning

Companies

William Patalon writes: For months now, North Korea has been threatening to launch a nuclear missile strike against the U.S. mainland.

However, the Pentagon has been quite confident in its assertions that the reclusive country doesn't have the technology to actually put a nuclear warhead atop a ballistic missile.


And even if North Korea were able to match a nuke with an ICBM, our military leaders said it could never reach the U.S. mainland.

But we knew better than to be so dismissive.

North Korea has sold so many missiles to Iran, Syria, Pakistan and others that intelligence analysts refer to the arms-dealer as "Missiles "R' Us."

That's why - back in February and March, in reports in both Private Briefing and Money Morning - we cautioned that North Korea's weapons technologies were likely much more advanced than the Pentagon would have us believe.

Now it looks like we were right to be so cautious.

A new U.S. intelligence analysis - revealed Thursday during a dramatic confrontation on Capitol Hill - says the Pentagon's key spy agency believes North Korea does have nuclear weapons that it can deliver via ballistic missiles.

Colorado Republican Congressman Doug Lamborn - reading what he says was an unclassified paragraph from a secret Defense Intelligence Agency (DIA) assessment that had been provided to some congressional officials - confronted the chairman of the Joint Chiefs of Staff with the revelation during a Thursday hearing.

Gen. Martin Dempsey, the Joint Chiefs chairman, appeared so surprised by what Lamborn had to say that he wasn't able to respond.

Later trying to downplay the news in Rep. Lamborn's queries, Pentagon Press Secretary George Little said, "While I cannot speak to all the details of a report that is classified in its entirety, it would be inaccurate to suggest that the North Korean regime has fully tested, developed or demonstrated the kinds of nuclear capabilities referenced."

But the message is still pretty clear: When it comes to North Korea it doesn't pay to be passive.

We're by no means telling you that it's time to panic.

But it does pay to be prepared-both from a national security standpoint and as it relates to your investments.

And because of the evolving North Korean threat, there is one company that's going to be a clear beneficiary of increased government spending on missile defense.

I'm talking about aerospace player GenCorp Inc. (NYSE: GY).

Here's why.

As our military continues to develop anti-missile systems to guard against missile threats, it's highly probable that GenCorp's Aerojet propulsion systems will occupy a very high spot on the Pentagon's shopping list.

On Feb. 13, in fact, Aerojet announced that its propulsion systems supported a "successful intercept test" of a Raytheon SM-3 guided missile off the coast of Hawaii. Meanwhile, Aerojet motors also provided propulsion for the SM-3's first and second stages.

The SM-3 can be based on land or at sea, and is a key element of the Obama administration's "Phased Adaptive Approach," which focuses on protecting the U.S. mainland from first-generation ICBMs. It will also protect American allies and U.S. "assets" around the world.

"Aerojet's propulsion systems have performed successfully on every SM-3 flight and intercept test to date," said John Myers, Aerojet's vice president of tactical programs. "This test further demonstrates the reliability of our tactical missile product line."

At present, Aerojet is the only U.S. propulsion firm that makes both solid rocket motors and liquid rocket engines. And the company wants to make certain that Aerojet remains the sector's Top Gun.

That's why, just last year, for instance, GenCorp dropped $550 million to acquire Pratt & Whitney Rocketdyne from United Technologies Corp. (NYSE: UTX).

Rocketdyne makes space-launch vehicles, missile-defense systems and advanced hypersonic engines. To date, it has powered nearly all of NASA's manned spacecraft, as well as the space probes that have traveled to nearly every planet in our solar system.

But I'm not the only one who thinks that GenCorp offers investors one heck of a profit upside. In a mid-Februaryappearance on CNBC's popular Squawk Box program, billionaire investor Mario Gabellinamed it as one of his two "stocks-that-would- double."

However, in making his case for GenCorp - in addition to the Rocketdyne deal- Gabelli also cited a second stock-price catalyst ... though this one was decidedly terrestrial in nature.

I'm talking about real estate.

By engaging in such activities as re-zoning, entitlement, leasing and outright sales, GenCorp is monetizing its excess-real-estate assets.

As Gabelli told his CNBC audience (which included me), GenCorp also has "significant acreage" in the Sacramento, Calif. area.

"And real estate is booming," he said.

So with GenCorp, there appear to be several potential "triggers."

"They bought Rocketdyne and they're closing on that," Gabelli said. "And that business - the basic manufacturing business, which has short-term hiccups - will earn about 70 cents in three or four years."

And that interview was before all of the recent North Korean saber rattling.

Indeed, when you consider these ingredients en masse, there's a very clear recipe for this $788 million small-cap firm to double in value over the next few years.

[Editor's Note: if you would like to join the thousands of investors Private Briefing has already helped to make big money in the markets, now you can do it at no cost to you.

In just 18 months, Private Briefing recommendations have generated two triples, three doubles and nearly 70 winners. To learn more about our free trial offer click here now.]

Source :http://moneymorning.com/2013/04/15/if-north-korea-has-nuclear-missiles-heres-the-one-stock-you-need-to-own/

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