Deutsche Bank Bullish On Defense Stocks After ‘Positive Inflection’ In U.S. Defense Spending

/ March 19, 2015

A recent report by Deutsche Bank focused on the U.S. defense sector and how an environment of rising interest rates and falling oil prices will affect defense stocks.

In the report, analysts raised their price targets for several names in the space.

Rising Rates And Falling Oil No Match For Government Spending

Analysts believe that the potential negative effects of oil prices and interest rates on defense stocks will be more than offset by higher government defense spending.

Overall, analysts see a modest rising rates environment as “benign” for defense names, but they do concede that falling oil prices coupled with potential Iran normalization is more of a risk.

Analysts remain bullish on the sector, however, because of the 2015 weapons appropriations passed by Congress in December. After seven years of falling defense spending, analysts see this legislation as an inflection point in the sector.

Election Cycle Outperformance

Analysts point out a positive trend in defense stocks in the year leading up to U.S. presidential elections. The defense group has outperformed the overall market in the year leading up to the election in eight of the last nine races and in every single election since 1984.

Stock Picks

Deutsche Bank raised price targets for seven big names in the defense space. Below is a summary of the company’s ratings and price targets mentioned in the report.

  • Huntington Ingalls Industries Inc HII 0.11%: Buy; $157 target
  • General Dynamics Corp GD 0.62%: Buy; $166 target
  • Level 3 Communications Inc LVLT 1.16%: Buy; $145 target
  • Northrop Grumman Corp NOC 0.2%: Buy; $179 target
  • The Boeing Company BA 1.04%: Buy; $175 target
  • Lockheed Martin Corp LMT 0.2%: Hold; $220 target
  • Raytheon Co RTN 0.06%: Hold; $120 target

Read this article and all my other articles for free on Benzinga by clicking here

Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!

Related posts