2 Defence Stocks to Consider for December 2023

Buying and holding the best defence stocks in Canada can be an excellent way to inject growth potential into your self-directed portfolio.

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As the year draws to its end, economies worldwide seem to finally have some semblance of control once again. As a result, we might be seeing more investments in companies that could not get much in the last few years. Considering the current geopolitical climate, one area of the market that can see some major investments is the defence sector.

As the economy looks poised to slowly creep out of the bear market, defence stocks might make for interesting investments. It is no secret that government spending and contracts in the industry account for most of its growth. Even during bear market environments, the spending on defence worldwide continues to rise.

The world is a scary place, and the last few months prove it. Considering these factors, defence stocks also enjoy stability through long-term contracts from the government. To keep the industry thriving, most defence contracts funded by the government are long term.

As the economy emerges from the bear market, defence stocks can be some of the top stocks, providing superior returns to investors. Today, we will look at two top Canadian defence stocks you can consider adding to your self-directed portfolio.

Bombardier

Heroux Devtek (TSX:HRX) is a $498.02 million market capitalization company headquartered in Longueuil. Heroux is an international company that specializes in designing, developing, manufacturing, repairing, and overhauling landing gear, actuation systems, and parts for the aerospace industry. It is also a major producer of military products, including fighter jets, transport aircraft, and helicopters.

Catering to the defence industry worldwide, the demand for its products and services is always high. It has enjoyed a strong performance, with sales climbing by 23.3% year over year in the first quarter. In that period, the company tripled its income to hit the $7.5 million mark.

As of this writing, it trades at $14.75 per share, down by 11.1% from its 52-week high but up by 13% year to date. It can be a good stock to consider investing in at current levels.

CAE

CAE (TSX:CAE) is a $8.75 billion market capitalization company headquartered in Montreal. It manufactures simulation tech, modeling tech, and training services for airlines and aircraft manufacturers, and defence customers. When it comes to Canadian defence stocks, CAE takes the top spot in the sector.

The stock enjoys a strong and low-risk buy rating from analysts due to its excellent performances, one quarter after the next.

As it continues to surge past earnings estimates consistently, CAE has been acquiring more businesses to bring under its umbrella. Having sold off its healthcare segment to the U.S. for $311 million, the company has positioned itself to increase focus on its more lucrative core business segments.

As of this writing, CAE stock trades for $27.42 per share, down by 19.04% from its 52-week high. At these levels, it looks too attractively priced to ignore.

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if CAE Inc. made the list!

Foolish takeaway

While these defence stocks do not have an upward momentum on the stock market as of this writing, it will not be surprising to see a surge soon.

If you are bullish on the defence industry seeing an uptick in the coming weeks, Bombardier stock and CAE stock can be two excellent investments to consider adding to your self-directed portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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