How diversified is your portfolio? Few new investors may realize this, but there’s a treasure trove of defence stocks to consider buying right now. More importantly, those stocks are often overlooked by most investors.
Here’s a look at two candidates to consider adding as part of your larger, well-diversified portfolio.
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Have you considered CAE?
It would be near-impossible to compile a list of defence stocks and not mention CAE (TSX: CAE). For those that are unaware, CAE is one of the largest defence contractors in Canada.
The company, which provides both training solutions and simulation equipment, is broadly segmented into three areas. Those segments include civil aviation, health care, and defence and security.
Demand for the products and services that CAE provides has grown in recent years. Prospective investors should note that there’s little reason to doubt that demand will slow anytime soon.
In fact, CAE is expected to deliver 45 full flight simulators during this fiscal year. This represents an impressive increase over the 40 previously reported.
As of the time of writing, CAE has surged nearly 20% year to date, far outperforming the market.
That potential extends well into CAE’s quarterly results as well. In the most recent quarter, CAE reported a profit of $78.1 million. This was a massive $26.2 million improvement over the same period last year.
This is not the Bombardier of the last decade
Bombardier (TSX: BBD.B) is a name that most investors should recognize. The plane manufacturer has emerged stronger a turbulent decade. During that period, Bombardier branched out into the commercial airliner space at considerable expense.
The company then proceeded to do a complete reversal and sell off most of its units. Apart from its commercial airline segment, Bombardier also offloaded its rail business and smaller turbo-prop business unit.
Today the company is smaller, leaner, and more focused. That focus is on the private jet market, where Bombardier is riding a massive tailwind (pun intended).
Specifically, the company has a massive US$14.8 billion order backlog, which is a welcome change for long-time followers of Bombardier. Bombardier churned out 123 jets in 2022.
Long-time followers might recall that deliveries were something Bombardier once struggled with. That impressive feat earned the company an accolade as the world’s busiest business jet manufacturer.
Those deliveries amounted to US$6 billion in revenue for the company. That bump was primarily attributed to its revamped Challenger and Global Express line of jets. The redesigned jets have received positive reviews from both crews and passengers.
The jets have also shattered several world records in speed and distance, setting a new benchmark for the segment. That impressive performance is expected to continue beyond 2023 now that markets have reopened.
In short, prospective investors looking for a defence stock with long-term potential should take a look at Bombardier.
Defence stocks to consider holding for long-term growth
All investments, even the most defensive, carry some risk. That’s why it’s important to diversify your portfolio with a collection of investments from a broad segment of the market.
That’s also why Bombardier and CAE are intriguing investments. In my opinion, one or both should form a small part of a larger, well-diversified portfolio.
