At last, the Government has woken up to the threat posed by the axis of evil that is China, Iran, North Korea and Russia.
In cash terms, it will boost defence spending by £75billion – paid for in part by taking an axe to the country's bloated army of stay-at-home civil servants . Although brief, its message was clear: investing in defence companies is good for the country – and good for investors. Or as Alec Cutler, a director of Orbis Investments, told me on Wednesday: 'Peace through strength is at the base level of a society's needs. Peace is a have-to-have, without which higher order desires relative to ESG will never achieve sustained traction.' Absolutely.
Here are 10 opportunities that investors may wish to consider. They represent attractive long-term investment ideas, based on the opinion of a panel of investment experts.BAE Systems already has a bulging order book – £37.7billion of orders were received last year 'From an investor point of view, BAE Systems is a difficult company to overlook,' says Keith Bowman, equity analyst at wealth manager Interactive Investor. 'With an attractive annual dividend of around 2.4 per cent, the City consensus is that its shares are a buy.'
Orbis's Cutler is encouraged by Rolls Royce's future stream of revenues from contracts such as supplying new engines for the United States' fleet of B-52 aircraft – 'valuable, non-cyclical cash flows'. Over the past year, the shares are up 7 per cent. The dividends it pays shareholders are above where they were before the pandemic struck.
Stuart Widdowson is manager of £190million investment trust Odyssean. He says all the key parts of Chemring's business should 'benefit' from Rishi's announcement last Tuesday: resulting in greater demand for products which protect aeroplanes and ships from heat-seeking missiles, through to cyber security systems.
He adds: 'Both now have comprehensive suites of cyber capabilities, supported by elements of Artificial Intelligence, machine learning and automation to deal with the complexities of today's military deployments.' Among its top 10 holdings are BAE Systems and Thales , German defence systems supplier Rheinmetall and French aircraft equipment manufacturer Safran.
Launched in July last year, it has assets of £266million. Over the past six months, it has produced a return of 29 per cent.According to the Investment Association, investment funds currently have £35billion invested in defence stocks. Most of this exposure is through broadly invested UK or global funds.