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Written by Adam Othman at The Motley Fool Canada
Defence is one of the smallest sectors in the Canadian stock market, and it makes sense, considering the country’s foreign policy and lack of security vulnerabilities. But it’s a relatively undesirable condition for investors who wish to tap into this market segment. Only a handful of defence stocks are trading on the TSX at any given time, and three of them might be worth looking into in September.
An aircraft manufacturer
While Bombardier (TSX:BBD.B) markets itself as a business jet manufacturer, the defence sector is a sizable part of its target market. The company has a product portfolio consisting of five different jets that can be used by militaries for a comprehensive range of aerial missions.
These jets offer relevant capabilities like high “hours of endurance” numbers (how long the jets can stay afloat) and easy installation of mission equipment.
However, that’s just one part of its business. The company has evolved to become purely an aircraft company, shedding its weighed-down railway business, and this has been a boon for the stock’s performance.
However, after an intense bull market phase that lasted from mid-2020 to mid-2022, the stock has mostly remained stagnant. This may not seem very appealing, but the price-to-earnings (P/E) ratio of just 4.5 is enough to keep an eye on this stock in September.
Its defence capabilities and services include specialized technologies and equipment like magnetic anomaly detection (MAD) and electronic warfare (EW) systems. It also offers services like fleet maintenance for military crafts.
Newer technologies, particularly artificial intelligence (AI), have transformed the training and simulation part of the industry quite radically. But the company’s diverse array of services is keeping it afloat. Right now, it’s suffering through a bear market phase and has fallen 23.4% in the last 12 months alone. But its core strengths remain, and a recovery is highly plausible.