These high-quality names are trading at discounts.
After a strong finish in 2022, the aerospace and defense stock industries maintained momentum through the first half of 2023. Amid a recent dip in performance for aerospace and defense stocks, high-quality names are trading at significant discounts.
The Morningstar US Aerospace & Defense Index—which measures the stock performance of companies that build and support aerospace and defense products—fell 5.6% in 2023 through Sept. 12, while the Morningstar US Market Index rose 17.9%. Over the past 12 months through Sept. 12, aerospace and defensive companies are up 4.7% while the broader market gained 11.4%.
The aerospace and defense industry is made of industrials companies that manufacture aerospace and defense products, including aircraft and aircraft parts, tanks, guided missiles, space vehicles, ships and marine equipment, and other aerospace and defense components and systems, as well as companies supporting these products through repair and maintenance services.
Notable firms within the Morningstar Aerospace and Defense Index include Boeing BA, and General Dynamics GD.
For this screen, we looked for the most undervalued stocks in the Aerospace & Defense Index with a Morningstar Rating of 4 or 5 stars. Next, we filtered that list for stocks that have also earned a Morningstar Economic Moat Rating of wide or narrow, meaning they have durable competitive advantages that are expected to last at least 10 to 20 years. Stocks with moats and low valuations historically tend to outperform over the long term. As of Sept. 12, 2023, two stocks met this criteria.
Here are the two undervalued aerospace and defensive stocks that made our list:
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