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Modern Warfare Is Hitting the World Stage

8 August 2014 in Trading Ideas

The roster of global trouble spots seems nearly endless right now.

Just in the past week, we’ve seen worrisome-to-devastating reports from Gaza, Iraq, Libya and Ukraine.

And as touchy as the topic is, the strife has undoubtedly created a market for the makers of weapons and technology that defines how conflicts are now waged.

Bloomberg reported last week that the conflict between Israel and Hamas has fueled speculation that Israeli military technology firm Elbit Systems will see more government orders.1

 

According to a report by Bank Leumi Le-Israel cited by Bloomberg, Elbit, which received about a quarter of revenue from its home country last year, may benefit as Israel re-evaluates security needs after the current conflict.

While Elbit doesn’t focus on munitions that could deflect rockets like the Iron Dome anti-missile defense system, there may be increased demand for products that protect Israeli soldiers in combat, such as its Guardium unmanned security vehicles.

Elbit’s stock is a component in the Modern Warfare motif, which has gained 22.6% over the past 12 months. During that same time, the S&P 500 has risen 15.5%.

In addition to a growing market due to military clashes, it also appears possible that defense companies could begin benefiting from relaxed export rules.

That’s, at least, the potential case for US-based makers of military drones. As the Wall Street Journal reported last month, US export-control officials appear poised to ease some rules that have sharply restricted sales of American-made military drones overseas, a step likely to result from Washington’s long-pending review of such transfers of such technology.2

The issue has been closely watched by aerospace companies eager to start selling military drones to other nations, the Journal said, as well as by human-rights groups skeptical about the spread of drone technology that can be used to carry missiles or for other military purposes.

Finding customers may not prove difficult. The Journal noted that India, Pakistan, Israel and China are among countries that have or are thinking about developing or procuring militarily capable drones.


1Gabrielle Coppola and Edith Waringa Kamau, “Elbit gains as Gaza Conflict Seen Fueling Defense Tech,” businessweek.com, July 27, 2014, http://www.businessweek.com/news/2014-07-27/elbit-gains-as-gaza-conflict-seen-fueling-defense-tech, (accessed Aug. 6, 2014).

2Andy Pasztor, “Washington May Ease Export Controls on Military Drones,” wsj.com, July 15, 2014.

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