Is HEICO Corp (HEI) the Worst Aerospace Stock to Buy According to Short Sellers?

Noor Ul Ain Rehman
7 min read

In This Article:

In this article, we will look at the 10 Worst Aerospace Stocks To Buy According to Short Sellers. Let’s look at where HEICO Corp (HEI) stands against other aerospace stocks.

The world is in a constant state of turmoil. Geopolitical tensions are escalating, leading to full-blown wars in certain world regions. While such tensions are dealbreakers for several industries, the aerospace and defense sector runs on a different model. Ironically, increasing geopolitical tensions are one of the most positive signs of profitability for these companies.

One of the critical drivers of revenue for such companies is government contracts for military-grade weapons, aircraft, and defense systems. The increased risk of war boosts defense spending, landing aerospace and defense companies more contracts. With defense stocks soaring after Iran’s recent missile attacks on Israel, investors are wondering if this is an overreaction to the ongoing conflict.

Scott Ladner, Chief Investment Officer at Horizon Investments, joined CNBC on October 2nd to discuss tensions in the Middle East and defense stocks. He sees potential in small caps and cyclical sectors if the economy cools. He said that although investors shouldn’t do anything in terms of the port strike stuff, it was too early to predict things related to the conflict in the Middle East.

The market tends to look through it very well when we look at the conflicts that have arisen in the region in the past. However, since Iran’s recent missile attacks on Israel seem more serious, the situation needs to be watched carefully. Despite that, Ladner says that he is optimistic at the present and believes they will find a way through the situation.

He is also of the view that the world is not getting any safer, with more money being put aside for defense. Apart from the situation in the Middle East, special threats from China and Taiwan, although not an urgent concern, also require careful attention. These circumstances make investing in defense stocks a reasonable choice in the present.

Sheila Kahyaoglu, a Jefferies defense analyst, joined CNBC’s ‘The Exchange’ on October 1 and said that the base case for US defense spending is in the 3-5% range. She also said that certain stocks in the defense sector have a potentially high revenue upside due to the events unfolding across the world.

Growth in Aircraft Orders

While sharing his insights on commercial aviation at the Morningstar Investment Conference in Chicago on June 26, Tony Bancroft from Gabelli Funds said he had noticed significant growth in aircraft orders, with both Boeing and Airbus holding a 12-year backlog of orders. He listed three reasons for this growth. The first catalyst, according to his perception, was China. China accounts for around 20% of the growth in orders to cater to the growing middle class in both India and China. This middle class has an increased inclination for travel.

Recommended Stories