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The defense sector: Stocks that moved with global tensions

The defense sector: Stocks that moved with global tensions

Among other things, the past several months have been highlighted by global upheaval and geopolitical unrest, with investors turning their watchful eyes to a sector that often thrives in times of turmoil: defense. 

After a challenging 2022, this year has also been marked by conflicts, most notably the ongoing war in Ukraine and the bombardment of Gaza. Amidst this upheaval, defense stocks have once again taken center stage. 

Known for their resilience during periods of uncertainty, these stocks continue to capture investor attention, with some names delivering standout performances. 

Axon Enterprise (NASDAQ: AXON)

Formerly known as TASER International, Axon Enterprise (NASDAQ: AXON) is an American developer of technology and weapon products for law enforcement, military, and civilians. 

Alongside a few other companies, AXON has outperformed the broader market in 2023, garnering favorable ratings among Wall Street analysts and delivering strong financial performance. 

The firm has witnessed impressive revenue growth in recent years, fueled mainly by law enforcement agencies’ growing adoption of body cameras and digital evidence management software.

Earlier this month, the company posted earnings per share (EPS) and revenue that beat consensus estimates. Revenue in the third quarter stood at $413.6 million, up 5.7% year-over-year. 

Year-to-date, AXON surged roughly 54% and is one of the best-performing names within the defense sector. 

AXON stock YTD chart. Source: Google

TransDigm Group (NYSE: TDG)

TransDigm Group (NYSE: TDG) is a company that designs and produces original aircraft parts sold to manufacturers. Additionally, the company also makes aftermarket replacement parts for commercial and military aircraft operators.

There are several factors driving TDG’s impressive 2023 gains. Primarily, the company delivered robust earnings and revenue growth in recent quarters and has recently announced a special, one-time dividend of $35 per share.

Furthermore, TransDigm also reached an agreement to acquire the Electron Device business of Communications & Power Industries for $1.38 billion in cash. 

In 2023, the stock soared almost 60%, outperforming the broader sector by some distance.

TDG stock YTD chart. Source: Finbold

Boeing (NYSE: BA)

Boeing (NYSE: BA), the world’s second-biggest jet manufacturer, has grappled with a few challenging years.

However, the worst seems to be over. The planemaker and defense contractor has witnessed a resurgence in its delivery numbers and has finally got to see its troubled 737 MAX return to the skies.

In addition, newer airframes such as the 777X, have secured major order deals. As such, Boeing has been regaining trust among stock investors and Wall Street analysts, and that’s reflected in its recent performance. 

Following a steep decline in October, BA embarked on a significant upward trajectory over the past several weeks, gaining almost 19% in the last 30 days. Year-to-date, the stock gained over 33.2%, outshining the wider stock market.

BA stock YTD chart. Source: Finbold

While defense companies attract many investors seeking stability, some conscientious investors choose to steer clear due to ethical concerns. The production of lethal weaponry and involvement in clandestine operations creates a moral dilemma, prompting some to prioritize principles over potential profits in the complex landscape of the defense sector.

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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