Market Overview

Analyst: Not Too Late To Buy Defense Stocks

Analyst: Not Too Late To Buy Defense Stocks

President Donald Trump called for a massive increase in military spending. While military defense names, such as Honeywell International Inc. (NYSE: HON) and Raytheon Company (NYSE: RTN), have already had impressive gains over the past year, many investors are wondering if they missed the boat.

Mark Tepper, the founder of Strategic Wealth Partners, said during a recent "Trading Nation" segment that now is indeed the time to be buying defense stocks. He noted that as a whole, defense stocks are now trading at an appropriate valuation.

Tepper explained that in the past defense stocks were believed to be trading at "extended" valuations but expectations for rapid earnings growth in the future has brought down the multiples to an "acceptable level."

See Also: Hundreds Of Companies Bid To Build Trump's Security Wall

"We think there is great potential," Tepper added. "We just heard President Trump talking — he is very committed to increasing defense spending. When you look at the Department of Defense they recently increased staffing which is a great leading indicator for an overall increase in defense spending."

Dennis Davitt, a partner at Harvest Volatility Management, also expressed a positive sentiment for the defense group. He noted that the group could also see increased growth if European allies start spending more on defense — as the Trump administration is pushing them to do.

However, his positive sentiment of the sector doesn't mean that stocks are attractive. Davitt expanded that the only thing that is cheap in the sector is found in the options market.

"There could be potential growth, there could be great volatility [and] it could sell off," he explained. "That's a place where you want to either buy puts to protect your position, or sell out of your position and do stock replacement strategies with calls."


Related Articles (HON + RTN)

View Comments and Join the Discussion!

Posted-In: CNBC Defense Spending defense stocksPolitics Top Stories Media Trading Ideas General Best of Benzinga