5 Defense Stocks Likely To Stay Ahead Of Sector In 2019
Zacks Investment Research | Dec 13, 2018 08:27PM ET
The U.S. defense companies stood tall through 2018, courtesy of a number of favorable factors. Let’s take a closer look.
One Year Price Return Performance
The fiscal 2019 U.S. defense budget, which provisioned for a spending of $716 billion on national security, acted as a major catalyst. Notably, this allotment reflected 5% real growth over the initial fiscal 2018 budget.
Meanwhile, U.S. arms exports saw a significant boost, contributing to the defense stocks’ rally. Evidently, the United States signed $46.9 billion in weapons sales to foreign allies in the first half of fiscal 2018, compared to $41.9 billion from fiscal 2017 (as told by Lt. Gen. Charles Hooper, head of the Defense Security Cooperation Agency, in an interview to Defense News).
A few big mergers and acquisitions this year also played part in enhancing U.S. defense space’s economies of scale. These include Orbital ATK’s $9.2-billion acquisition by Northrop Grumman (NYSE:NOC) and Rockwell Collins’ $30- billion buyout by United Technologies (NYSE:UTX) . Such takeovers are expected to expand operations and boost revenues for U.S. defense players in 2019.
What’s in Store for 2019?
As geopolitical conflicts continue to flare up on a global scale, the magnitude of existing issues carries the potential to bolster growth for U.S. defense companies in 2019 as well. Some of these issues involve growing terrorism activities in the Middle-East region, involving nations like Syria and Iraq along with Saudi Arabia-led coalition in Yemen. However, rising demand for Russian ammunition in Saudi Arabia and Iraq has to some extent lowered arms supply by the United States.
Moreover, President Trump has allegedly asked Defense Secretary to present a $750-billion defense budget proposal for fiscal 2020, per a report by Politico. If proposed, this will reflect a notable rise of $20 billion from the initial proposal made by Pentagon.
Defense Stocks to Pick
The aforementioned factors along with the expansionary policy reform likely to be adopted by the U.S. administration should encourage investors to add top-performing defense stocks to their portfolio. Here we have shortlisted five defense stocks that have outperformed the broader Zacks Investment Research
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