Weapons makers, long unloved despite solid earnings and cash flows, are in vogue again. Russia’s invasion of Ukraine represents the return of bloody, conventional warfare to Europe. War is once again symmetrical. Some lobbyists are even pushing for western weapons makers to receive ethical investment status.
In its biggest postwar defence pivot, Germany has announced a massive €100bn fund to modernise its military. It also pledged to increase spending to 2 per cent of gross domestic product, up from the 1.5 per cent it currently spends.
Expect other countries to follow suit. Global military spending is entering a secular upswing. European defence stocks — led by Germany’s Rheinmetall — have surged. US companies are set to benefit too.
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