In this article, we will explore stocks that may be worth buying during wartime.
During times of war, the military industry produces combat vehicles, ships, bombers, and fighter jets, while also offering cybersecurity, IT, analytics, robotics, and intelligence systems.
Companies in this sector primarily cater to the US government, which purchases their supplies during wartime, as well as other governments and law enforcement agencies.
Large military corporations such as Lockheed Martin Corp. (LMT), Raytheon Technologies Corp. (RTX), and Northrop Grumman Corp. (NOC) are examples of companies in this field.
The Invesco Aerospace & Defense ETF (PPA) offers a diverse range of stocks to invest in during wartime, including some from companies that are not exclusively defense-related, such as civilian aerospace manufacturers.
While PPA may not have performed as well as the broader market in the previous 12 months, with a total return of 7.09 percent compared to the Russell 1000 Index’s total return of 9.68 percent, it remains the most accurate representation of the defense industry.
What are Defense Stocks?
Defensive stocks are a reliable investment option as they typically offer consistent dividends and stable earnings, irrespective of market fluctuations. These stocks are less likely to be impacted by the ups and downs of the business cycle, owing to the perpetual demand for their products or services.
Does War Help the Stock Market?
The long-term effects of war are uncertain, and although there may be a minor decrease in prices, any potential benefits from reduced oil prices are unclear.
The impact of war on equity markets could be significant, with some studies indicating a potential decline of approximately 15% in the value of US stocks.
What Happens to the Stock Market if we go to War?
The possibility of a war can have a significant impact on the equity markets, resulting in a potential decline of around 15% in the value of US stocks. Sectors such as consumer discretionary, airlines, and information technology are likely to be affected, while the gold and energy sectors may experience a surge in demand.
Is War Good for the Economy?
The concept is subject to debate.
However, the idea that the shopkeeper could have spent his money elsewhere if the window had not been shattered ignores the unseen effects of the broken window. Economic success is not guaranteed by war, and while some countries have benefited from it, others have fallen behind. War is also an expensive endeavor, diverting resources from other industries such as healthcare and education that could benefit the economy in the long run.
Despite these uncertainties, one thing is clear: effective investment, particularly in large amounts, can contribute to economic growth.
List of Top 7 Stocks to buy During War
Lockheed Martin (NYSE: LMT)
Investors may want to consider exploring military equities, which have shown resilience in uncertain times.
While the S&P 500 index has experienced a 9% loss year-to-date, shares of aerospace company Lockheed Martin have increased by more than 9% during the same period.
However, the stock of Lockheed Martin has been volatile in recent years, lacking a clear trend, which leaves uncertainty for investors.
Nevertheless, positive developments in the industry can provide a sense of security for stakeholders.
Raytheon Technologies (NYSE: RTX)
With escalating tensions in Ukraine, Raytheon Technologies is a defense stock that is under scrutiny.
However, unlike Lockheed Martin, RTX stock has only increased by a little over 2%.
Despite the fact that Raytheon and Lockheed have collaborated on the Javelin Weapon System, the missile of the hour, this is still the case.
The Javelin is advertised as an “anti-tank guided munition that can be carried and launched by a single person,” and it has significant implications for how Ukrainians will defend themselves against a much stronger adversary.
If the Russians invade, they will undoubtedly bring their tanks. However, confronting them could result in a hailstorm of American technology.
Boeing (NYSE: BA)
Boeing, a prominent defense stock, is primarily known for its civilian operations rather than its military applications and has underperformed in the sector.
Year-to-date, BA stock has lost 8%, and the equity unit has declined by 5% in the past year.
However, for investors focused on the Ukraine war, Boeing could be a potential opportunity for investment.
L3harris Technologies (NYSE: LHX)
During periods of heightened tensions and potential military conflict, investors often focus on defense stocks that offer weapons systems and defensive platforms.
L3Harris Technologies, a company that provides a broad range of solutions for air, land, and sea-based defense as well as space and digital operations, is a prime example of this.
Booz Allen Hamilton (NYSE: BAH)
Although physical warfare is unlikely to occur between the United States and its adversaries, cyberattacks pose a significant threat as they can be carried out by anyone, anywhere, and have the potential to cause severe damage.
Asymmetric in nature, cyberattacks can be catastrophic and require comprehensive protection strategies to safeguard against them. Booz Allen Hamilton is a company that specializes in this field, offering various solutions for cybersecurity.
In the current climate of heightened tensions in Ukraine, Russia may conduct cyberattacks against the United States. Therefore, investing in defense stocks like BAH can be a prudent move to ensure preparedness against potential cyber threats.
Northrop Grumman (NYSE:NOC)
It appears that Putin may have made a rare mistake and the situation is becoming more challenging for him. He demanded that NATO should not infiltrate Ukraine but is now experiencing the opposite: greater support from the west. This could escalate tensions further. In such a scenario, Northrop Grumman’s MQ-4C Triton drone could prove valuable.
The MQ-4C Triton drone is designed for real-time intelligence, surveillance, and reconnaissance. It can provide critical information while ensuring the safety of service members.
Huntington Ingalls Industries (NYSE: HII)
Huntington Ingalls Industries, the largest military shipbuilding company in the United States, may not have a direct role in the ongoing crisis in Ukraine. However, with Ukraine being surrounded by crucial shipping lines, any potential conflict may involve more than just ground warfare. While the majority of the combat may take place on land, HII’s naval strength could still play a significant role in the long run.
Moreover, the involvement of the United States in Eastern Europe is driven by the desire to contain China, making Huntington Ingalls a critical component of the broader military narrative. Therefore, while HII may not be in the spotlight at the moment, it remains a vital player in the overall military strategy.