Investors looking to hedge their portfolios by buying into sectors that remain somewhat unaffected by the pandemic can consider defensive stocks 2020. Defense spending is generally less impacted by the economy or other events like the COVID pandemic. Besides, the geopolitical situation around the world is also getting more volatile post the trade war between the US and China.
Shifting geopolitics driving the best defense stocks
Even before the pandemic broke out in late 2019, the world was already witnessing a shift in geopolitics. The South China Sea issue had been festering for months, rising nationalism was translating to strong political decisions, and the desire to “bring back manufacturing” was leading to trade tensions. Asia was seeing plenty of volatility with India and Pakistan tensions. Meanwhile, China and its neighboring countries were also experiencing difficult moments. The Middle East was no different, with Russia and Turkey’s involvement in military actions. So, there was plenty of defense spending being done by various governments. This defense spending meant new orders for defense companies. Companies like Lockheed Martin, Boeing, Raytheon, Heico, and General Dynamics, generally counted among the top aerospace and defense stocks benefitted from the resulting tailwinds.
Heico Corporation – A defense stock worth considering
Heico is an aerospace and electronics company with a focus on niche markets. Its products include components and subcomponents found in aircraft, spacecraft, missiles, high-end shipboard and ground-based applications. While the company does half of its business with commercial aviation, that segment is currently undergoing a challenging time. The defense part of the company’s business is less volatile.
According to company CEO Laurans A. Mendelson, ” With respect to the results of operations, approximately half of our net sales are derived from defense, space, and other industrial markets, including electronics, medical, and telecommunications. Demand for products in that half of our business has not been fundamentally impacted and its operational results remain materially consistent with the financial expectations prior to the outbreak.”