With the six-year bull market succumbing to a rising tide of negative offshore economic news, there aren’t many commercial equities in which investors can hide to avoid the carnage. But what about defense shares, the only equities whose underlying revenues and returns do not depend on the commercial business cycle? After years of softening domestic sales — but steady-to-rising margins — Pentagon contractors currently face an improving demand environment both at home and abroad. The biggest companies have adopted a series of measures designed to reward shareholders, including continuous dividend increases and stock buy-backs. Now the defense sector looks poised for a wave of merger and acquisition activity. Even in the current, bleak investment environment, defense shares look surprisingly attractive. I have written a commentary for Forbes here.
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