As an investor, it’s important to always be on the lookout for undervalued sectors with potential for growth. One such sector that is currently being overlooked by Wall Street is the defense industry. According to Citi, the SPDR S & P Aerospace and Defense ETF has only risen about 6.1% year to date, trailing behind the broader market’s performance. However, Citi remains confident in the growth prospects for defense companies and believes that investors are underestimating the potential for this sector to outperform.
Why should investors pay attention to the defense industry? Well, for starters, U.S. defense spending is on the rise, despite what some may believe. In addition, European countries are increasing their defense budgets as well, which could benefit companies in the sector. Historically, defense companies tend to trade at a premium to the rest of the market when defense budgets grow, providing an opportunity for significant appreciation in stock prices.
Citi argues that defense companies deserve a higher growth rate than what investors are currently pricing in, and recent data supports this claim. Companies with accelerating revenue growth and margin expansion are particularly attractive investment opportunities, according to Citi analyst Jason Gursky.
So, which defense companies should investors keep an eye on? Citi has identified a few favorites with buy ratings from the bank. Leidos Holdings, for example, has seen impressive growth and has margin growth potential, making it an attractive pick. Lockheed Martin is also a strong contender, benefiting from U.S. and European defense spending increases. Science Applications International Corporation is another top pick, positioned for growth in the government services and IT sector.
Overall, the defense industry presents a compelling investment opportunity for those looking to capitalize on the sector’s growth potential. By investing in companies with strong revenue growth and margin expansion, investors can position themselves for significant returns in the coming years. Stay tuned for more updates and insights on investing in the defense industry from Extreme Investor Network.