Comparison of The Best European Defence Stocks to Buy

Never, from 1945 to today, has peace in the West been endangered as it is today. Every day Russia threatens Europe with nuclear weapons, this after invading Ukraine and this worries all the states of the world so much that in practice today there is a rush to re-arm the likes of which has not been seen since the 1950s. of the last century even “stability pacts” were revised trying to put expenses for weapons, training and ammunition for soldiers off-balance sheet. After talking about global and American weapons industries, today we will talk about European ones.

In all of this, obviously the large arms industries are profiting and we cannot find another more democratic tool than simple shares to buy to give everyone the opportunity to earn money by making simple investments.

At the bottom you will be able to see indicators from which you can understand what are the best actions to take on these companies.

 

Here are the 5 largest european defence companies (Leonardo is first only because it is Italian)

1. Leonardo
2. Airbus
3. Bae Systems
4. Rheinmetall
5. Thales

Comparison of the best weapons and defense stocks to buy in 2024

1. Leonardo stocks, technical analysis

The Italian holding company for the aeronautical sector recorded a modest recovery, closing with an increase of 0.59%. The market debut remained stable compared to the previous day’s close, followed by a progressive improvement during the meeting. A weekly comparison with the FTSE MIB trend line revealed a more pronounced upward movement in Leonardo’s performance, indicating a greater appetite among investors to buy shares of the Italian defense contractor compared to the overall index.

In terms of short-term analysis, Leonardo’s status and trend show a strengthening of the bullish phase, with immediate resistance at 20.16 and initial support identified at 19.18. Technical expectations suggest further upward momentum towards new highs estimated around 21.14.

Regarding risk analysis, trading this stock seems suitable, especially for risk-averse investors.

The trend remains relatively steady, supported by an increase in volume to 4,795,343 compared to last month’s volume moving average of 2,910,960. This data suggests a stable and positive trajectory for the stock, providing insights for investors considering their risk tolerance and market positions.

2. Airbus Stocks Technical Analysis

Airbus recorded a notable increase, marking a gain of 3.16% compared to previous values. The stock had a dynamic start, opening at 153.4 euros, approaching the levels seen in the previous session, only to then record a decline in performance during the session. Weekly comparative analysis reveals that the Airbus trend shows a more pronounced trajectory than the FTSE MIB trend line, indicating a greater appetite for investors to buy Airbus than the index.

Technically, Airbus is currently in a strengthening phase, with a resistance area at 154.5 and immediate support at 149.5. Operationally, the session is expected to continue in a bullish manner, with resistance expected at 159.5.

In terms of risk analysis, Airbus presents fairly balanced daily volatility, consistent volumes that, for some sessions, exceed the moving average of volumes over the last month.

This scenario is considered preferable for risk-averse investors who prefer to avoid sudden and violent stock movements. The overall analysis suggests a positive trend for Airbus, with technical indicators supporting a bullish attitude and a risk profile that aligns with more conservative investment strategies.

3. Bae Systems shares technical analysis

In the latest stock market session,  Bae Systems rallied 1.52%, starting the session on a neutral tone but steadily rising to close at 14.72, near the high of the day.

The one-week technical outlook indicates a slowing trend for Bae Systems versus the DAX, potentially making it a selling target for investors.

The short-term trend for Bae Systems is improving, with resistance at 14.96 and support at 14.49. Technical analysis suggests an extension of the bullish trend towards the resistance area identified at 3.43pm.

Risk analysis reveals daily volumes of 141,860, surpassing the one-month moving average of 88,901, indicating strong market interest in Bae Systems.

The narrow price deviation, coupled with a daily volatility of 1,391, suggests that this investment is more suitable for risk-averse individuals, as the market shows greater interest and relatively limited price fluctuation.

4. Rheinmetall shares technical analysis

In the financial sector, the arms and auto parts maker posted a modest gain, up +0.62%. The market open aligns with the previous session’s close, with gradual strengthening observed throughout the day. The weekly analysis of the Rheinmetall AG stock highlights a more pronounced bullish trend line compared to the reference index, indicating greater market attractiveness for the stock. State and trend analysis reveals signs of strengthening for the short-term trend, with immediate resistance noted at 428.6 and a support level at 414.9. Rheinmetall AG’s balanced bullish strength is confirmed by the upward crossover of the 5-day moving average over the 34-day moving average, suggesting a potential continuation of the bullish phase towards 442.3.

Risk analysis finds daily volumes of 351,948, surpassing the one-month moving average of 332,082, signaling strong market interest in Rheinmetall AG. Despite the relatively small price deviation, with a daily volatility of 1,724, the investment is considered more suitable for risk-averse individuals.

5. Thales shares technical analysis

In the trading session on February 29, the aerospace and defense company recorded a modest increase, closing with a gain of 0.33%. The stock got off to a positive start, opening at 137.3 euros near the previous day’s peak, demonstrating resilience throughout the session before stabilizing at 137.1, near the day’s highs.

A weekly comparison with the CAC40 index revealed a more pronounced trend in Thales, indicating a greater appetite among investors to buy Thales shares compared to the broader market.

Analysis of status and trend signals revealed strengthening indicators for the short-term trend, with immediate resistance observed at 138.7 and a support level at 135.5, controlling the current phase.

Thales’ balanced bullish strength was supported by the upward crossover of the 5-day moving average from the 34-day moving average. Based on the technical implications, a continuation of the bullish phase towards 141.8 was expected.

Risk analysis described Thales’ recent trend as relatively stable, with a remarkably low daily volatility level of 1,267.

Daily volumes, totaling 984,695, surpassed the one-month moving average of volumes set at 297,964, encouraging medium-term trading amid sustained investor interest.

COMPARISON OF STOCK INDICATORS

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Why european defence stocks are better than US

Management at major U.S. defense contractors often justify optimistic growth expectations by citing the global landscape’s increased volatility, pointing to factors such as the Russia-Ukraine conflict, China’s threats to Taiwan, North Korea’s activities, and numerous contingencies in the Middle East. While instability in parts of Latin America could also contribute, it plays a relatively minor role in defense market projections. Surprisingly, in 2023, this narrative failed to boost most U.S. defense stock prices, as they underperformed both the S&P 500 and their counterparts in Europe, India, and South Korea. This trend continues into the current year, with European defense stocks, such as Hensoldt, Rheinmetall, Saab Group, and Leonardo, showing significant increases in prices, surpassing their U.S. counterparts like BAE Systems, Thales, and Dassault Aviation, which experienced more modest gains.

As of February 16, 2024, Hensoldt, Rheinmetall, and Saab Group saw their prices surge by 41%, 35%, and 30%, respectively, while Leonardo recorded a 25% increase from its closing value at the end of 2023. BAE Systems, despite having more sales in the U.S. than in the UK, witnessed a more conservative rise of 12%. Thales and Dassault Aviation, both involved in commercial aerospace alongside defense, registered single-digit percentage increases. This contrasting performance highlights a divergence in investor confidence between U.S. and European defense markets, challenging the conventional wisdom that geopolitical tensions inevitably drive up the stocks of major defense contractors.

Stocks of major U.S. defense companies, such as Lockheed Martin and Northrop Grumman, have experienced declines, with Lockheed Martin down 7% and Northrop Grumman down 4% as of February 16. L3Harris remains flat, while RTX, with more aerospace exposure, has seen a 9% increase. In contrast, stocks of firms offering defense and federal services have shown resilience, posting gains of 12-14%. Several factors contribute to these trends, and currently, no imminent developments are expected to alter the situation. The primary factor is Congress’s failure to pass fiscal 2024 appropriations and a supplemental security package, including military aid for Ukraine, Israel, and Taiwan, along with support for the U.S. submarine industrial base. U.S. contractors anticipate congressional action by March, minimizing uncertainty. However, the Fiscal Responsibility Act of 2023 poses a risk, potentially resetting appropriations for fiscal 2024 and most of fiscal 2023 if any of the 12 appropriations bills remains funded under a continuing resolution after April 30, 2023.

European defense budgets are not subject to similar challenges, avoiding threats of spending cuts and continuing resolutions. This contrasts with the U.S. situation, where the fate of the supplemental security package remains uncertain, particularly concerning crucial military aid for Ukraine. The aid’s importance for Ukraine’s defense is underscored, but doubts emerge regarding U.S. support for the country’s functioning government due to new ideas circulating in Congress. Despite the potential resolution of fiscal uncertainties, the broader geopolitical landscape, including defense budgets in China, Iran, North Korea, and Russia, remains a factor influencing market dynamics for defense companies.

In this section, several factors influencing the defense market are highlighted. Firstly, the impact of former President Donald Trump’s statements on NATO commitment and the possibility of his reelection in 2024 is discussed. The market perceives his return as positive for European defense but potentially unfavorable for U.S. defense due to his “Buy American” stance. European leaders are urging increased defense spending on European contractors, and a shift towards “America First” policies could further reinforce this trend. Another factor is the varying perspectives on Russia as a security threat, with partisan differences in the U.S. and countries like Finland, Sweden, and Poland having distinct views on the Russian military threat.

The section also addresses the combination of contractor performance, inflation, and long-term defense budget expectations as the fourth factor. U.S. defense companies like Lockheed Martin and Northrop Grumman have faced challenges such as excess costs on fixed-price contracts, supply network issues, and rising labor and material costs, leading to unique challenges not seen globally. Lastly, the consideration of U.S. defense stocks lagging behind global peers and broader indices is noted. Despite major share repurchases, there’s a suggestion that leaders of U.S. defense contractors may need to reassess narratives and strategies to navigate these complex market dynamics.

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