Defense Contractors Are Sitting On Record Order Books — And the Highest Hiring Demand They’ve Seen Since the Cold War - The Average Joe

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    Defense Contractors Are Sitting On Record Order Books — And the Highest Hiring Demand They’ve Seen Since the Cold War

    Noah Weidner

    June 21, 2024

    They say a company’s outlook can be gauged by its “Careers” page — and in 2024, this holds especially true. High-profile layoffs across corporate America have saddled tech and office workers with pink slips. But while button-up gigs have cut back on hiring, one sector has been eager to hire — desperate to make good on orders they’ve already been paid for.

    Battle of brains: Thanks to a record $2.4T spent globally on defense in 2023, many defense contractors are sitting on equally record-breaking orders — and, in turn, pressing demand for staff to help fulfill orders for vehicles, aircraft, and weaponry. With conflicts in the Middle East and Ukraine stoking geopolitical angst, defense firms are hiring at rates not seen since the end of the Cold War — with some aiming to increase their workforce by 5-10%.

    • Major players like Lockheed Martin ($LMT), Northrop Grumman ($NOC), and General Dynamics ($GD) have 6K open positions — while ten smaller industry players are looking to add 37K jobs.
    • According to ASD Secretary-General Jan Pie, the defense sector is experiencing “the highest increase in order volume in a rather short period of time.”

    Ready for War?

    Can record demand and hiring translate to record stock prices? It depends. Despite recent all-time highs for indexes tracking the domestic defense business, such as the iShares US Aerospace & Defense ETF ($ITA), their year-to-date (YTD) returns of 7% are only half the S&P 500’s — and many US defense stocks are underperforming.

    • Lockheed Martin is barely in the green, while Boeing ($BA) and Northrop Grumman are down this year.
    • Conversely, European defense contractors have generated some of the best returns in the world, buoyed by billions in new investments by European nations.

    Defense posture: For exposure to the global defense boom, Absolute Strategy Research’s Ian Harnett suggests the Global X Defense Tech ETF ($SHLD), an actively managed fund that includes 35 domestic and international stocks. This fund, which excluded market losers like Boeing, has been beating the S&P 500 and Nasdaq-100 with a 20% return YTD. However, before buying in, consider whether record defense spending will continue or fade like a brief missile explosion.

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