Three stocks that can benefit from increased defence spending

As geopolitical risks and terrorism threats increase, these companies are well positioned to seize the spoils.

Vikram Barhat 7 June, 2017 | 5:00PM
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The historic US$110 billion arms deal with Saudi Arabia inked by President Donald Trump on his recent visit to the Middle East kicked up a political storm back home. The deal has raised some uncomfortable questions about humanitarian damage, but it has also unlocked tremendous growth opportunities for the U.S. defence and aerospace sector.

U.S.-based defence and aerospace companies that virtually control the global market for arms trade are the biggest beneficiaries of the rising defence spending within the United States and its global allies, owing to elevated geopolitical risks and the scourge of terrorism.

The 2017 Global Aerospace and Defense Sector Outlook report from Deloitte Global shows that worldwide spending is set to experience stronger growth. Deloitte forecasts revenue for the global aerospace and defence sector (more than US$700 billion) to grow by about 2% in 2017, whereas defence sub-sector revenues are projected to grow at a much faster 3.2% for the same period, driven by the increased allocation to U.S. military funds. The U.S. budget accounts for nearly 50% of the addressable market, as per Fitch Ratings.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
General Dynamics Corp196.75 USD1.55Rating
Lockheed Martin Corp344.20 USD0.72Rating

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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