Donald Trump is a vocal critic of international conflicts, especially those in which the US gets involved militarily or financially. At his inauguration, he continued the old Republican policy of Peace Through Strength, implying that the US and its allies should increase defense spending not to fight more wars but to ensure fewer wars happen.
In other words, this means defense contractors continue to make money even if global conflicts die down under Donald Trump. EU leaders have just held an informal meeting to discuss transatlantic relations and defense spending. President of the European Commission, Ursula von der Leyen, is considering extraordinary measures to boost defense budgets.
Under these circumstances, it is vital to understand that most defense and aerospace stocks should continue to benefit even during peaceful times. We, therefore, decided to create a list of stocks that are likely to survive any change in policy during the unpredictable Donald Trump’s term.
To come up with our list of 10 Defense and Aerospace stocks that will benefit from Trump’s Peace Through Strength policy, we only considered stocks that have a market cap of at least $5 billion, an ROE of over 15%, and a forward PE under 40 against an industry average PE of 63.
10. BWX Technologies Inc. (NYSE:BWXT)
BWX Technologies Inc. is a nuclear component manufacturer and distributor that operates through commercial and government operations. It is mainly a defense contractor that specializes in developing and sustaining nuclear reactors for the US Navy. The company recently announced that it secured 2 contracts for nuclear energy projects worth more than a billion Canadian dollars.
As per the first contract, BWXT will develop 48 steam generators for the Pickering Life extension program which is in its initial phase. The company is manufacturing generators at its Cambridge facility and the completion of the project is predicted in mid-2030. Under the second contract, the company will build the reactor pressure vessel for the BWRX-300 small modular reactor.
In addition to the rewarding contracts, the company’s stock performance was quite good in the second half of the previous year. BWXT’s stock experienced an upward momentum right after the US election, though it calmed down after the election gradually returning to the position it was at before the election. Investors should keep in mind the company’s strong fundamentals and take this decline in prices as an opportunity for a better outcome later in the year.
9. Curtiss-Wright Corporation (NYSE:CW)
Curtiss-Wright Corporation is an engineered product, services, and solutions provider to commercial power, aerospace & defense, process, and general industrial markets. It operates in defense electronics, aerospace & industrial, and naval & power segments. The company released its Q3 earnings report recently and showed an outstanding performance.
According to the report, aerospace & industrial revenue went up by 4%, defense electronics revenue rose by 12%, and naval & power sales grew by 14%. As a result of the strong Q3 performance the company increased its FY 2024 financial guidance. The expected revenue growth is 7-9% while the expected operating income growth is 7-10%.
Analyzing the company’s attractive financial guidance and stock performance over the previous year, it might continue to draw investors’ attention as countries boost their defense spending. The stock outperformed the market by gaining over 50% in the last year and has the potential to consistently deliver high single-digit growth.
Hedge Fund Resource Center