HomelandDefenseStocks.com talks to Michael Scott, manager of the SPADE Defense Index
Recent performance of aerospace, defense, and homeland defense stocks
Point Roberts, WA and Delta, BC - August 2, 2017 (Investorideas.com Newswire) Investorideas.com, a global news source and investor resource covering actively traded sectors including defense stocks issues a recent interview conducted through its defense portal, HomelandDefenseStocks.com (HDS).
HomelandDefenseStocks.com talks to Michael Scott (MS), who manages the SPADE Defense Index; discussing the recent performance of the aerospace, defense, and homeland defense stocks.
HDS. Since the Presidential election, defense and homeland defense stocks have soared. Can you please put some numbers to it for us?
MS: Since the Nov 8th election, the Powershares Aerospace & Defense ETF (NYSE: PPA) which tracks our SPADE Defense Index is up 24% at historic highs. In comparison the S&P500 which has gained 15.5. More importantly for long-term investors, since 2000, the SPADE Defense Index has gained 511%, outperforming the broader market by a staggering 433%.
HDS: And it appears that besides significant performance gains, a greater number of investors are now benefiting as well.
MS: Well we can't quantify exactly where inflows are coming from, whether its existing investors in the sector or new ones, or whether current investors recognize the sector's long-term vitality or see it as a short-term play, but assets under management (AUM) into funds targeting the sector have surged. Overall, total assets in the sector have grown more than 4x the previous peak and 10x the previous trough. More dollars are flowing into the sector and funds like PPA, than ever before; and it likely has as much to do with the election results confirming support for healthy US government spending in defense and security as it does from the constant barrage of news events highlighting terrorist actions and potential military situations around the globe This news flow keeps people's attention focused on the sector.
HDS: As do tweets from the White House
MS: Yes. In addition to the proposals by President Trump to increase defense and homeland security spending significantly in the coming years, the president has tweeted about a number of billion dollar deals with international governments for U.S. military and aerospace hardware as well as commenting on ongoing global situations whether it be North Korea, Russia, or NATO.
HDS. Correct me if I am wrong, but this really isn't a new trend beyond the fact that it is the president is the one tweeting.
MS: I think social media as a whole has tremendous impact on making us aware of what is happening around the globe and in real time. The proliferation of individuals capable of recording events as they happen using their smartphones and then having that info picked up by media outlets is creating an engagement level heretofore not seen. In some cases, we've become immune to these events because they are happening so frequently but keep in mind that since before its founding, the US has been involved in a new conflict roughly every 20-odd years with most periods of relative peace and prosperity lasting less than that.
HDS. When do you see this cycle reversing?
MS: I really don't. Unless there is a dramatic change in philosophy by the White House and Congress, budgets should remain stable and strong. International sales by US firms have been strong as well since foreign governments face many of the same security issues that we do. Cyber security, well there are no shortage of threats or actions involved and the importance of protecting our data and networks has never been more understood. Meanwhile commercial orders for aircraft, as indicated by Boeing's tally at this summer's Paris Air Show, remain strong, and have been adding fuel to the sector.
HDS: A good segway for us to shift gears and ask about key takeaways from the Paris Air Show
MS: The event was as robust as usual with more than 150,000 reported visitors over the week and roughly 2300 exhibitors. The 100 degree heat was a bit of a downside (especially when wearing a suit). Sales to commercial passenger airlines show that they are optimistic enough about economic growth to commit billions of dollars for new planes. The 7-odd year cycle is evolving into a 14-year double cycle. Other highlights of the show were Lockheed Martin ramping up production on the F-35 fighter and putting on a demonstration of its capabilities in flight including a full throttle routine with a high G vertical climb. The plane has begun to achieve its potential and should be a major cash cow for the company. When it comes to drones, there were a lot on display with the focus being on small and consumer craft versus larger military drones of years past. Overall Boeing received $75 billion in orders and commitments for 571 aircraft including 350 for the launch of the 737 Max10. Production on the 737 lines is being raised from 42 to 47 per month up to 47 per month by 2020 to meet demand. Others with interesting presentations including Kratos' jet powered Valkyrie drone being billed as a wingman for fighter pilots in aerial battles and Leonardo (Italy) showing the Falco for first responders fire fighting and humanitarian relief. Boom Tech of Denver showcased its supersonic 55-seat Mach 2.2 jet, dubbed the Concorde 2.0, which it hopes to launch by 2023.
HDS: Any word on Boeing's next plane?
MS: The firm indicated a decision on the Boeing 797 is coming soon.
HDS: How is the current earnings season playing out?
MS: Early indications are that many of the companies that comprise the SPADE Defense Index will outperform during the current 2Q17 reporting season. Already Boeing and Northrop Grumman have reported earnings that outperformed estimates and raised near-term guidance.
To learn more about the SPADE Defense Index, visit spadeindex.com
Readers should note that the information presented in this interview by SPADE Indexes is for information purposes and should not represent a solicitation or an offer to purchase an investment product. Investors interested in the Powershares Aerospace & Defense ETF, ticker 'PPA,' should visit the powershares.com website for a prospectus.
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