We recently published a list of 10 Defense and Aerospace Stocks To Benefit From Trump’s Peace Through Strength Policy. In this article, we are going to take a look at where HEICO Corporation (NYSE:HEI) stands against other defense and aerospace stocks to benefit from Trump’s peace through strength policy.
Donald Trump is a vocal critic of international conflicts, especially those in which the US gets involved militarily or financially. At his inauguration, he continued the old Republican policy of Peace Through Strength, implying that the US and its allies should increase defense spending not to fight more wars but to ensure fewer wars happen.
In other words, this means defense contractors continue to make money even if global conflicts die down under Donald Trump. EU leaders have just held an informal meeting to discuss transatlantic relations and defense spending. President of the European Commission, Ursula von der Leyen, is considering extraordinary measures to boost defense budgets.
Under these circumstances, it is vital to understand that most defense and aerospace stocks should continue to benefit even during peaceful times. We, therefore, decided to create a list of stocks that are likely to survive any change in policy during the unpredictable Donald Trump’s term.
To come up with our list of 10 Defense and Aerospace stocks that will benefit from Trump’s Peace Through Strength policy, we only considered stocks that have a market cap of at least $5 billion, an ROE of over 15%, and a forward PE under 40 against an industry average PE of 63.
A fighter jet in formation, revealing the prowess of the companies defense arm.
HEICO Corporation (NYSE:HEI)
HEICO Corporation is a manufacturer, designer, and supplier of aerospace, electronic, and defense-related products and services. It operates through two segments: the electronic technologies group (ETG) and the flight support technologies group (FSG). HEI continues to be a defense growth story as well as a beneficiary of the air travel recovery witnessed in the past year.
KeyBanc Capital Markets rated the stock Sector Weight last month when its analysts initiated coverage on the company. The reason for this was the current valuation that the industry trades at, which is above the historic valuation range. This limits future gains. However, HEI’s unique market position enables it to survive any industry-wide downturn, especially if the air travel recovery slows down as this is a discretionary expenditure for many.
On the other hand, defense spending may not necessarily slow down even if Donald Trump is able to resolve international disputes. To maintain peace, countries will be willing to increase defense spending and that should benefit HEI.
The company’s USP is that it makes quality equipment that sells at 30%-40% less than competitors. As long as it is able to maintain this advantage, it should be able to do well even if all the potential headwinds materialize.
Overall, HEI ranks 5th on our list of defense and aerospace stocks to benefit from Trump’s peace through strength policy. While we acknowledge the potential of HEI as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as HEI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
