If the Best Offence Is a Good Defence, This Stock Is a Winner

If you want an essential stock, defence stocks are definitely ones to consider. And CAE stock is seeing an increase after this recent move.

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Inflation was up in Canada this month, hitting 2.9% after falling to 2.8% in February. Yet if you’re worried that it’s going to cost you, which it will, of course, in some respects, there are other ways higher inflation can make you money.

One area is the defensive sector. This is an essential area of the economy and one seeing even more high demand. So, let’s get into what’s going on and one way to take advantage with a winning stock.

Getting defensive

Even during economic downturns, defensive stocks are some of the best companies to buy. These are unaffected since people, companies, and governments need these products, regardless of the economic situation.

The geopolitical situation has been quite volatile. In fact, Canada continues to pledge billions in new defence spending, aiming for a 2% commitment designated by the North Atlantic Treaty Organization (NATO).

The federal government will increase its spending to $8.1 billion through a cash injection. This will increase it from 1.38% to 1.76% of the country’s gross domestic product (GDP) by 2029 to 2030. This will miss the 2% target, with most spending happening after the next election. While it might be short, it’s far higher than the traditionally slow spending role Canada has taken in terms of defence spending.

Taking advantage

One company that can certainly take advantage of this stable spending is CAE (TSX:CAE). CAE stock is a company that specializes in simulation and training solutions. These include aviation and defence.

The focus on defence and aviation is hugely beneficial, with the company offering a range of simulators for various aircraft types. These include fixed-wing aircraft as well as helicopters. It also includes training for military personnel, such as virtual training environments as well as mission rehearsal systems.

These training systems are always upgrading as well as expanding through partnerships. And that includes CAE stock recently signing an agreement with Nav Canada.

The deal

CAE stock signed an agreement with Nav Canada to help train flight service specialists and air traffic controllers. Starting this fall, the company will use Nav Canada’s training curriculum to start initial training.

This partnership will allow even further training. This will be a strong increase after Nav Canada acknowledged flight delays from a lack of air traffic controllers. The training will then increase, providing fewer delays.

So, not only will CAE stock help with the defensive sector, but it will also help with the continued delays from flight companies across North America — something the Air Transport Association called “unacceptable.”

Bottom line

Shares of CAE stock plummeted as the company missed its fourth-quarter earnings. It’s also been making some major changes, including the sale of its healthcare business. Yet with these new partnerships, the company is now expanding within areas it knows and performs the best. With that in mind, CAE stock should quickly rise back, with shares up 4% already in the last month alone.

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 Amy Legate-Wolfe 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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