Avoid defense stocks during high-sentiment periods
The guest argued against buying defense stocks when geopolitical tensions have already bid up their valuation multiples.
The argument
The speaker explained that defense company revenues do not spike overnight during conflicts due to the slow nature of government contracting. The optimal strategy is to wait for peacetime sentiment to compress multiples to the mid-teens before buying for steady earnings growth.
The thesis, stress-tested
✓ What validates it
- ✓Defense stock price-to-earnings multiples reverting to mid-teens levels
▸ Risks discussed
- ▸Sudden peacetime sentiment could compress multiples further
Hear it yourself
"We own the names that we want, and, it's just Ted considers almost like owning a piece of real estate, where you can get a a mid to high single digit dividend yield, little bit of growth, in the earnings over time, and, and really know that the valuation is always gonna be pretty reasonable because it's just such a steady business."
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