Here are the reasons why we have to invest in defense, security and cyber security stocks. Businesses in security, cyber security, and defense sectors don’t know crises. Their stocks get a positive trend too.
With threats that seem disappear since 2008, western countries digesting the 2008 financial crisis and had to lower their budgets have slashed their security and defense spendings. But with the big drop in spending, threats are back.
Wherever the threats are, inside the national soil (terrorist attack risk) or outside (operation to support a foreign country), it seems that as soon as we lower our guard the threats are back, that is guaranteeing a high spending level in these sectors.
The end of lower security and defense budgets has come, western governments to communicate on 5% to 10% on average budget hikes in order to face terrorism and outside operations. Those budget hikes in order to hire professionals (law enforcement and military) that need to get paid, dressed and armed.
Arms dealing is a barometer of a country power and of its role in the world diplomacy. Buying weapons to United-States instead of France for example is not neutral. That underlines the will for the buyer to get a long-term economical relationship with the seller country, with maintenance contracts (the official version) and more subtle political and diplomatic long-term relationship, and some military assistance in case of threat.
Security and defense industries are less exposed to economic cycles and downturns than other industries. When it comes to protect a country and his people, it is always mandatory to face the threats. Threats that are facing western countries nowadays are guaranteeing a high spending level for the next years, and no government will take the risk of lowering those spendings, taking the risk of being lax about security.
Some studies show recently that IT security spending will represent 25% of all the IT businesses budget in the next 5 years. Facing hacking risks, companies and people don’t have other choices that buying anti viruses and firewall softwares, for the first very basic level of protection, making big money for the cyber security industry.
Here our list of our preferred security, cyber defense and defense stocks.