Global turmoil and bloody conflicts are not bad news for everyone. The defense industry has been enjoying a nice run in the stock market from armed conflict breaking out across the world from Gaza to Ukraine to Syria. Much of the upside comes from the use of weapons made by US multinational corporations in conflicts that may or may not involve the US directly. Even just a standoff or threat of armed conflict can spur defense spending by governments and enrich weaponry makers.
War is highly lucrative for the defense firms as old inventory is often literally destroyed instigating the need for new purchases of older items as well as a market for new products. War can also often be the proving ground for new products.
For instance, Gaza was the first major test of the Iron Dome missile defense system the development of which was financed by both the Israeli and US governments. Now that the technology has been proven to work effectively the product can be sold around the world.
Led by Lockheed Martin Corp. (LMT), the biggest U.S. defense companies are trading at record prices as shareholders reap rewards from escalating military conflicts around the world. Investors see rising sales for makers of missiles, drones and other weapons as the U.S. hits Islamic State fighters in Syria and Iraq, said Jack Ablin, chief investment officer at Chicago-based BMO Private Bank. President Barack Obama approved open-ended airstrikes this month while ruling out ground combat…
In its first night of airstrikes into Syria, the U.S. dropped about 200 munitions and launched 47 Raytheon-made Tomahawk cruise missiles, according to U.S. Central Command. The military also deployed Boeing’s GBU-32 Joint Direct Attack Munitions and Hellfire missiles from Bethesda, Maryland-based Lockheed, creating an opening for restocking U.S. arsenals.
The war on ISIS has already broken $1 billion with no end in sight. The Pentagon says that since June it has been spending roughly $10 million a day. Much of the money is going to defense contractors like Raytheon and Lockheed who provide munitions to the US military. The over $1 billion estimate comes from the Associated Press as the Pentagon refuses to give a specific number which could be much larger.
It is worth noting that even just a few drone and missile strikes can add up to big money for weapons makers. Endless war may have degraded our democracy and freedoms but it has made some people very rich.