With the recent terrorist attack in Paris and speculation that more attacks are to come throughout Europe and the US, many are wondering if the world is on the precipice of a new major military conflict. From an investor’s perspective, it begs the question, “what are some stocks that do well during wartime?”
Here are a few that I think could be interesting.
I’ve listed these in the order in which I would recommend buying them. Looking back at 2001, when the attack on the World Trade Centers happened and in the months following RTN, GD, NOC, and LMT all did very well. UTX and BA did not do well. Those two fell along with the rest of the market as the economy was in recession from bursting of the technology bubble. For that reason, BA and UTX would not be my first choice. TDG was not publicly traded at the time.
As far as just looking at the financial statistics, TDG is the fastest growing, but because it wasn’t around during the last major terrorist attack and because it balance sheet has more total debt than total assets, it is listed further down. LMT has somewhat poor financial statistics. The high price to book ratio and the high debt to equity indicate that they also have a much higher debt load than many of the companies. Also, their net profit margin is on the low end of the group. So, although I think LMT would do well during wartime, I like the top 3 companies more because of the strength of their financials.
The performance of these stocks on November 16th, after the weekend news from Paris, I think gives a unique insight and preview as to what might happen to these stocks if there are additional attacks in the US and Europe. RTN and NOC performed exceptionally that day, up over 4%. For that reason I’ve ranked them as the best choices, with GD behind them based on the strength of their financials.
The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.