Shares of three of the largest defense company’s shot up this Friday, September 22nd. Those companies are Lockheed Martin, Raytheon and Boeing. Some strategists have stated that defense stocks are being added to their portfolios fundamentally. The conditions and valuation of the industry seem to be rising respectively.
There are several geopolitical tensions currently at play that have given the go for defense stocks. With the S&P 500 aerospace and defense index shooting up since the month of May, it seems like now is the time to invest.
An equity strategist Miller Tabak who works on defense stocks stated that “obviously we have a situation where President Trump wants to increase the defense budget, and we’re not getting a whole lot of pushback from Democrats; they’re focused on other issues. We also have North Korea, and I think that’s going to escalate. So on a fundamental, long-term basis, they still should look good.”
He further stated that they’ve “kind of leveled out in the last couple of weeks.”
At current levels, the big names in the defense industry have not presented a decent enough value for investors to sink their money in. Raytheon and Lockheed Martin specifically are currently stuck in a trend that has not broken in recent times.
Eric Gibbs, portfolio manager at S&P Global stated that “we like these stocks because they’re nice blue-chip, stable growth companies. But overall, we’re expecting about 9 percent growth for this year and next year, which is 20% less than the S&P 500.”
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She further stated that “the industry valuations are quite high relative to the S&P 500.”
The valuation for the defense industry has finally broken above the high level for a course of 12 years, and the hopes are high that it will only continue to grow.