The Lockheed Martin (LMT 1.65%) F-22 Raptor stealth fighter is arguably the most expensive fighter jet ever built, costing an estimated $400 billion per unit. That's part of the reason it's no longer being built, by the way. (The F-22 program was canceled more than a decade ago, although the plane remains in service.)

Now, President Donald Trump wants to have the Air Force buy a new fighter jet that could cost even more. Two of them, in fact.

Image source: Getty Images.

Upgrading the F-22, and the F-35, too

As Reuters reported earlier this month, the president recently raised the possibility of having Lockheed build a new stealth fighter, based on Lockheed's F-35 stealth fighter but with two engines instead of just one, to be called the F-55. A second idea floated by the president is to let Lockheed restart production of its long-canceled F-22 program in an upgraded form, to be known as the F-22 Super. 

No price was named for either aircraft, although price is definitely on the president's mind. Speaking at a meeting of business leaders and aerospace executives in Doha, Qatar, Trump explained, "We're going to do an F-55 and -- I think, if we get the right price, we have to get the right price -- that'll be two engines and a super upgrade on the F-35, and then we're going to do the F-22 [Super] ... a very modern version of the F-22 fighter jet."

Furthermore, he stated, "We're going to be going with it pretty quickly."

Throwing a life preserver to Lockheed

Not everyone's on board with the idea. As defense-focused news site 19fortyfive.com quickly pointed out, creating a twin-engine version of the stealthy F-35 may not even be "feasible." On the other hand, the website noted that the Air Force has already agreed to pay RTX (RTX 1.35%) more than $1 billion to upgrade sensors on the F-22 fleet, turning it into what Lockheed CEO Jim Taiclet has called a "fifth-generation plus" fighter able to sense and strike targets farther out than currently possible.

So Lockheed Martin is likely to like the president's proposals (both of them). The more so seeing as it's been only a couple of months since the Air Force handed Lockheed a rather shocking defeat, when it awarded the $20 billion contract to build a sixth-generation stealth fighter, the F-47, to rival Boeing (BA -0.39%).

With only one such sixth-generation warbird so far announced, that loss holds the potential to put Lockheed a generation behind Boeing in its competency building stealthy fighter jets. This could create a whole new dynamic in which Boeing, not Lockheed, has the advantage in winning future fighter jet contracts.

But if Lockheed gets to build a "fifth-generation plus" fighter (or two), the technology gap might not loom quite so large, and Lockheed might remain within striking distance of its rival.

Boeing versus Lockheed Martin versus Northrop Grumman

In fact, that might be the plan. Trump, of course, has a well-known penchant for shaking up chessboards in order to create new and more advantageous negotiating positions (albeit with the unfortunate side effect of sometimes knocking over pieces).

That's not easy to do in the defense industry, which, after going through repeated rounds of consolidation after the Cold War, now comprises really just five big "defense primes" capable of executing the Pentagon's biggest defense contracts. Awarding F-47 to Boeing, then perhaps handing F-55 and F-22 Super contracts to Lockheed, could be the president's way of ensuring these aerospace companies remain both solvent, with enough revenue coming in to stay in business, and able to keep competing with each other, such that no one company gets so dominant that it can dictate prices to its primary customer, the U.S. government.

If this is the president's plan, it could also help the Pentagon when it comes time to negotiate pricing on a new F/A-XX stealth fighter jet that the Navy wants to buy, and that both Boeing and Northrop Grumman (NOC 1.05%) are angling to build. (And if this is the president's plan, it may also give investors a hint at who will win F/A-XX. Should that one go to Northrop, the Pentagon would have three aerospace defense prime contractors, all bidding against each other on future stealth fighter contracts.) 

Which defense stock to buy?

Whoever ends up winning these fighter jet contracts, from an investor's perspective, I see one of these three stocks as clearly superior to the others: Lockheed Martin.

Lockheed (20 times earnings) costs slightly more than Northrop Grumman (19) when valued on generally accepted accounting principles (GAAP) earnings, but sports a much better price-to-free-cash-flow valuation, 22 to Northrop's 38, as confirmed by data from S&P Global Market Intelligence. (Unprofitable and cash-burning Boeing doesn't even make it to the starting line in this race.) Lockheed also boasts a projected long-term earnings growth rate of 13%, twice as fast as Northrop. Why, Lockheed even has the best dividend yield of the bunch at 2.8%.

Regardless of whether the president's mooted new fighter jets actually materialize as defense contracts for Lockheed, the stock is already the one with the most value to offer investors.