Actions, ETF: How to invest in taking advantage of the Boom in the Defense sector?

The actions of the defense sector are flambhers, carried by the announcements of a vast European rearmament plan. But after such a flight, is it still time to invest and how?

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Investors are offensive in the defense sector. On the stock market, European companies linked to armaments or strategic industries (aviation, aerospace, radars, advanced electronics, etc.) have been in full boom for a few days: +19% At the opening on Monday March 3 for Dassault Aviation, +16% for Thales, or +15% At the closure for Rheinmetall (a German conglomerate specializing in armaments). A flambé widely fueled by the announcements in favor of a European rearmament, with, in high point, the presentation, this Tuesday, March 4, of a plan of 800 billion euros of the European Commission to invest in the defense industry.

However, the sharp increase in recent days should not hide an increase in the courses that had already settled for several months: “In reality, since the anticipation by the Victory Markets of Donald Trump, the European defense values ​​had already started upwards. Thus, since last September, the increase is to 57% On the Stoxx Europe Total Market Aerospace & Defense index, which brings together the 27 largest companies in the sector ” Note Alexandre Baradez, market analyst at IG France.

A risk of arriving after the battle?

Also, for investors who would like to start the rocket, it may already be too late. First, because valuations are therefore found at historically high levels: “The risk is to buy at a peak, which limits the chances of added value (resell your more expensive actions than has been bought, editor’s note)”, explains Antoine Andreani, research manager at XTB France.

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Then, investors are not sheltered from a flame return: “When there is a sudden acceleration of courses, that everyone talks about a sector, it is often already too late, there is a risk that this sign the start of excesses, and that part of investors will take their profits (resell their actions, editor’s note)”Alexandre Baradez analysis. Thus, a correction of 10 to 15% in the coming weeks is not to be excluded for this specialist in technical analysis.

Actions adapted to a long -term tactic

However, if it will undoubtedly be difficult to achieve a short -term gain, supplying its portfolio with European stocks in the sector can remain a good maneuver over time. “European countries seem to have integrated that they will now have to do more for their defense, they will no longer give up on this subject, it is therefore a potentially carrier theme”estimates Alexandre Baradez. Problem, there is no (yet) ETF (or “trackers”) to follow the main values ​​of the sector at a lower cost in Europe.

It will therefore be necessary to build your own arsenal of titles with a dozen actions drawn from several European countries: Dassault, Safran or Thales in France, Rolls Royce and Bae Systems for Great Britain, Rheimtal and Mtu Aero Engines in Germany, Leonardo in Italy and Saab in Sweden, for example. If there is no dedicated ETF, a “tracker” positioned on the Stoxx Europe 600 Industrial Goods & Services “Can also contain these major values ​​while being exposed to industrial companies that could also benefit from this reset”estimates Alexandre Baradez. Finally, we must not forget, as shown in recent days, “That these values ​​are very sensitive to geopolitical risks, by nature unpredictable, it is therefore necessary to diversify your portfolio with other sectors, to limit its risk“Warns Antoine Andreani.