Citi says defense stock concerns likely overdone, shares attractive

Citi analyst Jason Gursky says U.S. defense stocks have declined as much as 30% since the election, driven by concerns over the potential policies of the new administration and actions the Department of Government Efficiency might recommend. These concerns are likely overdone and the stocks remain attractively priced, the analyst tells investors in a research note. Citi sees the biggest risk to the outlook for U.S. defense spending as changing role of the country in the post-World War II order it helped to create. It is possible President-elect Trump “will choose to pack up the military’s bags and retreat to bases on the home front, leaving allies to defend for themselves and allow the US to materially cut defense spending,” contends Citi. However, the firm does not think that’s the likely outcome given the potential negative impact on global trade, which remains important to the U.S. economy. CIti’s Buy-rated defense stocks are General Dynamics (GD), L3Harris Technologies (LHX), Leidos (LDOS), Lockheed Martin (LMT), SAIC (SAIC) and Textron (TXT).