US military budget is expected to grow 3.6% YoY until 2033. The US is home to the world’s Top 10 defense companies. With VC firms increasingly funding defense tech startups, how can you participate?
Good catch sir! For the purpose of summarizing everything in one post we just looked at companies with +50% revenue from Defense contracts. But BA is great too
Nov 30, 2023·edited Nov 30, 2023Liked by Uttam Dey, Amrita Roy
Yes, but not new since the war & geo tensions ... by the time it's clear it's expensive usually ... but since 10y plus: BAE Systems (British), Palantir (since DPO) & LMT (US) ... natural hedges, income (BAE & LMT pay divis) for optionality or reinvest in the same, small allocations (I am not concentrated, more like all weather approach and diversified).
Thanks for sharing. I properly started looking at this sector probably about 2 years ago, and similar to you, I am concentrated, but rather, have an exposure to it that allows me to earn dividends and ride the possible upside. Currently, the 2 companies in the space that I am invested in are LMT and RTX (raytheon).
Welcome, cool, RTX is looking good also (on my watchlist/wish list) ... if they do well fundamentally but gets sold also in a broad sell-off (human emotion, cash raising, algos/ai bonkers), might be a good one ;)
RTX had a sharp selloff in October and since then recovered. Though I am not a technical trader/analyst, it doesn't yet look like it has cleared levels where it warrants a long term bull run.
Hehe well imagine if just Twitter/X introducing the blue check caused algos to move 10bn+ in some single names (given the confusion which account was the official and which was fake and funny ‘press releases’), imagine what can and likely will happen with AI, deep fakes and u name it … there will be occasional huge dislocations and opportunities for people to pick up top names at 20-40% discounts, and from there sharp recoveries … but initial conviction is a big prerequisite vs paper hands :)
I like your search for unconventional ideas, as I´ve said before! Defense on the national level is a practical necessity in real life, if we like it or not. Personally I´m staying away. Also large money pools have ESG filters which will keep money from flowing into the sector, so I´m not sure if public companies will benefit from more orders, but I´m always ready to learn and be surprised.
You are 100% spot on with the practical necessity for defense at a national defense. This is true for all nations, but ever more so important for the US to hold its position as the world's largest power position.
The defense sector can be messy at times, and you are right about being careful with ESG shelter terminology. Ultimately, with this investment, you look at the big picture and given the underlying technology and valuation, you decide whether you want to invest or not.
In the last decade, defense tech has underperformed SP500, could be because the overall military spending was on the decline. With military spending projected to grow this decade, this is a tailwind for the sector. But once again, you should only invest in companies which you are comfortable with.
"However, as an investor it is important to abstract feelings of sentiment"
No offense, but can't do that. Fine line between investing and encouraging eternal war for profit. That used to be called blood money. Not on these hands.
Thanks Dino. 20 years is a long time. Were you serving in the US military?
What had you generally invested in? Was there any reason for not investing in defense? Have to admit though the defense sector overall had underperformed in the previous decade.
Spot on. Also thematic ETFs help you diversify away from concentration risk. There are a few parameters such as Expense Ratios, Turnover that you need to know but as long as you go for the larger ETFs you dont need to worry too much as long as you're sure about your industry's trends.
There is an abundance of information available online. Its easier to read online, understand trends and use the knowledge to grow your money over and over. That's also what this newsletter tries to accomplish - free financial literacy. :)
Great coverage, thank you!
P.S. don't forget, you need Maverick also in your arsenal ... he can go inverted and show the birdie to the enemy ;) :P :> ;) :)
"You're talking to me, Goose"
Good catch sir! For the purpose of summarizing everything in one post we just looked at companies with +50% revenue from Defense contracts. But BA is great too
Roger, roger! :)
Great coverage!
Do you invest in any defense tech companies ?
Yes, but not new since the war & geo tensions ... by the time it's clear it's expensive usually ... but since 10y plus: BAE Systems (British), Palantir (since DPO) & LMT (US) ... natural hedges, income (BAE & LMT pay divis) for optionality or reinvest in the same, small allocations (I am not concentrated, more like all weather approach and diversified).
You ? :)
Thanks for sharing. I properly started looking at this sector probably about 2 years ago, and similar to you, I am concentrated, but rather, have an exposure to it that allows me to earn dividends and ride the possible upside. Currently, the 2 companies in the space that I am invested in are LMT and RTX (raytheon).
Welcome, cool, RTX is looking good also (on my watchlist/wish list) ... if they do well fundamentally but gets sold also in a broad sell-off (human emotion, cash raising, algos/ai bonkers), might be a good one ;)
Lol to the "algos/ai bonkers".
RTX had a sharp selloff in October and since then recovered. Though I am not a technical trader/analyst, it doesn't yet look like it has cleared levels where it warrants a long term bull run.
So you may get your chance.
Hehe well imagine if just Twitter/X introducing the blue check caused algos to move 10bn+ in some single names (given the confusion which account was the official and which was fake and funny ‘press releases’), imagine what can and likely will happen with AI, deep fakes and u name it … there will be occasional huge dislocations and opportunities for people to pick up top names at 20-40% discounts, and from there sharp recoveries … but initial conviction is a big prerequisite vs paper hands :)
Extremely informative!
Thanks, I am glad you found it useful.
Thank you, Amrita & Uttam. Thought provoking article!
Thank you Harold, glad you found it insightful.
I like your search for unconventional ideas, as I´ve said before! Defense on the national level is a practical necessity in real life, if we like it or not. Personally I´m staying away. Also large money pools have ESG filters which will keep money from flowing into the sector, so I´m not sure if public companies will benefit from more orders, but I´m always ready to learn and be surprised.
You are 100% spot on with the practical necessity for defense at a national defense. This is true for all nations, but ever more so important for the US to hold its position as the world's largest power position.
The defense sector can be messy at times, and you are right about being careful with ESG shelter terminology. Ultimately, with this investment, you look at the big picture and given the underlying technology and valuation, you decide whether you want to invest or not.
In the last decade, defense tech has underperformed SP500, could be because the overall military spending was on the decline. With military spending projected to grow this decade, this is a tailwind for the sector. But once again, you should only invest in companies which you are comfortable with.
I thought this was a spoof. Sorry, defense contractors don’t need any more investment. We already pay them plenty with our tax dollars.
You should always design your investment portfolio in a way that makes you comfortable.
"However, as an investor it is important to abstract feelings of sentiment"
No offense, but can't do that. Fine line between investing and encouraging eternal war for profit. That used to be called blood money. Not on these hands.
Thank you for your comment.
Thanks Dino. 20 years is a long time. Were you serving in the US military?
What had you generally invested in? Was there any reason for not investing in defense? Have to admit though the defense sector overall had underperformed in the previous decade.
Spot on. Also thematic ETFs help you diversify away from concentration risk. There are a few parameters such as Expense Ratios, Turnover that you need to know but as long as you go for the larger ETFs you dont need to worry too much as long as you're sure about your industry's trends.
There is an abundance of information available online. Its easier to read online, understand trends and use the knowledge to grow your money over and over. That's also what this newsletter tries to accomplish - free financial literacy. :)