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How The 2020 Presidential Election Could Impact Defense Stocks

Defense stocks were among the sectors that were seen as getting a big boost when Donald Trump was elected president.

With the 2020 presidential election underway, investors are trying to decide how defense stocks will fare under a Trump re-election or a Joe Biden presidency.

Defense Stocks Under Trump: Trump has increased defense spending for the United States and that is seen as likely to continue with him going forward.

A re-election of Trump as president with a Democratic majority Congress could put some roadblocks in his way.

Big defense companies that get the majority of their revenue from the government or military sectors could be the big winners under Trump.

Trump’s emphasis on getting flights back to the moon and establishing a Space Force could also help defense stocks with exposure to the space industry.

Lockheed Martin (NYSE: LMT) could be a good stock for a Trump win in the 2020 presidential election. The company reported strong third-quarter earnings and is adding to its backlog.

Nine-month revenue was $19.6 billion for aerospace, $8.4 billion for missile and fire control, $11.8 billion for rotary and missions systems and $8.6 billion for space.

The company is well diversified across the defense sectors, which all could benefit from another four years of Trump.

Another big defense stock to watch if Trump is reelected is Northrop Grumman (NYSE: NOC). The company operates in aerospace, mission systems and technology.

Northrop Grumman has been a winner from increased defense spending, with shares up over 60% in the last five years.

Defense and aerospace ETFs have been hurt by the weakening airline sector and could continue to see declines until a recovery occurs.

Related Link: How The 2020 Presidential Election Could Impact Health Care Stocks

Defense Stocks Under Biden: Former Vice President Joe Biden has not spoke much about his plans on defense spending. Biden is expected to put fighting climate change at the forefront instead of fighting other countries.

Biden has said election interference will not be tolerated and he will hold those responsible if they do. Potential Biden plays in the defense sector could center around more of a cybersecurity theme.

The SPDR Kensho Future Security ETF (NYSE: FITE) is an ETF that could be a winner under Biden with a focus on cybersecurity.

Companies with less than 50% exposure to government spending could also see a boost under Biden with their diversification.

Satellite company Viasat Inc (NASDAQ: VSAT) provides broadband and communication services to government and others, with less than 50% of revenue coming from government.

The company has seen strong government wins and has a $2-billion backlog.

Biden has put an emphasis on infrastructure spending and Parsons Corporation (NYSE: PSN) could be a good stock pick for infrastructure and defense spending.

Parsons provides tech solutions for defense and intelligence agencies. The company also provides engineered solutions for highways, bridges, rails tunnels and airports. The company counts the Department of Defense and Department of Energy as customers.

Parsons has a $7.7-billion backlog and has its revenue split at 51% critical infrastructure and 49% federal solutions over the last 12 months. 

Benzinga’s Take: The defense sector is worth watching during the 2020 presidential election. Trump has been open about increasing the amount of defense spending and positioning America as the world’s top military.

Biden has been less vocal about defense spending, which could mean some diversification is needed in the sector. Stocks that have exposure to defense, but get large portions of revenue elsewhere could be good Biden picks.

See more from Benzinga

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.


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