Investors are piling into defence stocks as geopolitical tensions and the sector’s strong fundamentals boost performance, new data from GraniteShares shows.
Total AUM in GraniteShares 3x Long Rolls-Royce Daily ETP (3LRR) and 3x Long BAE Daily ETP (3LBA) increased during February to nearly GBP80 million from GBP44 million and trading activity surged as investors reacted to Government plans to boost defence spending and the performance of the two companies.
The 3x Long Rolls-Royce Daily ETP (3LRR) achieved returns of 78.09 per cent and 3x Long BAE Daily ETP (3LBA) delivered 40.36 per cent last month.
Rolls-Royce’s defence division secured a major win with the GBP9 billion Unity contract from the UK Ministry of Defence, reinforcing its role in key programmes such as the Typhoon jet engines and nuclear submarine reactors. Rolls-Royce is seeing strong performance in its civil aerospace market, the firm writes.
Manuj Sarpal, Chief Technology Officer at GraniteShares, says: “Growing geopolitical tensions and uncertainty around the Trump administration’s NATO stance have driven European nations to boost defence spending, benefiting firms like Rolls-Royce and BAE Systems.
“Investor confidence in the defence sector is evident but beyond defence, Rolls-Royce is capitalizing on a recovering civil aerospace market, with large engine flying hours surpassing pre-pandemic levels at 102 per cent by late 2024.
“Given the strong fundamentals and shifting geopolitical landscape, there could be further increases in investment in the defence sector in coming days.”
