July 16th, 2026 | 07:30 CEST
Defence or Artificial Intelligence? On the Hunt for Blockbusters with Rheinmetall, Hensoldt, Strategic Resources, and TKMS
The market is becoming increasingly concentrated. Despite fresh record highs in July, the number of true winners can almost be counted on one hand. The strongest performers continue to be a select group of high-tech and AI stocks, while semiconductor shares are already beginning to lose momentum. Meanwhile, oil and gas stocks are picking up speed again, while the long upswing in the defence sector that began in 2022 appears to be running out of steam. As a result, many defence companies ranked among the worst-performing stocks during the first half of the year. Now the summer slowdown has arrived, and even a potential interest cut by Fed Chair Kevin Warsh is unlikely to lift sentiment. The reason is straightforward: inflation remains stubbornly high, hovering around the 4% mark in the US for an unusually long time. President Donald Trump had hoped that replacing Jerome Powell would pave the way for lower interest rates, but those expectations now appear increasingly unrealistic. Then there is the tariff setback, which is costing US taxpayers another USD 100 billion. In short, the warning signs of a broader market correction are becoming increasingly difficult to ignore. For active investors, the only real question is when, not if. Against this backdrop, we take a closer look at the battered defence sector in search of the next potential blockbuster investment.
time to read: 6 minutes
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Author:
André Will-Laudien
ISIN:
STRATEGIC RESOURCES INC | CA86277X4093 | TSXV: SR , RHEINMETALL AG | DE0007030009 , HENSOLDT AG INH O.N. | DE000HAG0005 , TKMS AG & CO KGAA | DE000TKMS001
Table of contents:
Author
André Will-Laudien
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
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Rheinmetall and TKMS: EUR 12 billion in revenue changes hands
The German Federal Ministry of Defence's surprising decision to permanently terminate the crisis-ridden F126 frigate project sent shockwaves through the German defence industry in the summer of 2026. The DAX-listed company Rheinmetall emerges as the clear loser in this contract poker game; following the sudden withdrawal of what was believed to be a sure major contract, its stock plummeted by a historic 20% to just under EUR 900. The Düsseldorf-based technology group had only recently acquired the shipbuilder NVL to position itself as a new maritime general contractor and is now losing a contract volume of around EUR 12 billion that it had believed was a sure thing. In contrast, the long-established Kiel-based shipbuilder thyssenkrupp Marine Systems (TKMS) emerged as the clear winner, with its share price surging by more than 10%. Its 51%-owner, thyssenkrupp, also celebrated with double-digit gains.
To save time and budget resources, the German Armed Forces is now ordering a total of eight modernized frigates of the proven MEKO A-200 class from TKMS. This radical change of course is shifting significant revenue streams within the national defence industry and ensures long-term capacity utilization at TKMS's shipyards in Schleswig-Holstein well into the 2030s. For strategic investors, this tectonic shift in the markets creates entirely new entry opportunities in both the short and long term. Thanks to its enormous backlog and additional opportunities in major international projects, such as the submarine tender in Canada, the TKMS stock is increasingly coming into focus for defensive portfolios. At the same time, the sharp price drop at Rheinmetall offers bold investors an attractive entry point, as the remaining core business—ammunition and tracked vehicles—continues to benefit massively from NATO's historic record budget. Furthermore, the IG Metall union is already pushing for a joint venture, which could ultimately allow Rheinmetall subsidiaries to secure a share of the pie as subcontractors. Analysts on the LSEG platform remain bullish and expect a 12-month average price target of EUR 1,696 for Rheinmetall. However, the last 15 reports signal downward revisions into the EUR 1,000 to 1,450 range. The consensus is therefore set to fall further. For TKMS, revenue is projected to rise from EUR 2.1 to 2.7 billion in 2027; however, with the share price climbing to EUR 85, the group's market capitalization has risen to EUR 5 billion—which is, after all, already double its revenue. Analysts at LSEG are nevertheless sticking their necks out, and have set an average 12-month target of EUR 100.80. We'll see!
Hensoldt: No Momentum from the NATO Summit in Ankara
Hensoldt recently provided a good example of exaggerated expectations. In the run-up to the NATO summit, the stock surged by a whopping 26% to around EUR 81.00, after previously consolidating below the EUR 65 mark. This was immediately followed by a fundamental disappointment. The meeting in Ankara yielded neither concrete contract signings nor new momentum that would justify an adjustment to existing financial estimates. The recent price surge also reveals a strategic misjudgment by the market, as Hensoldt is indeed a strong sensor specialist but by no means the automatic frontrunner for major land and naval platforms. The fact that Swedish competitor Saab has secured the radar suite for the TKMS MEKO A200 frigates and that Diehl is making a splash with the IRIS-T SLS Mk 4 highlights the limitations of the Munich-based defence contractor. Since Hensoldt's maritime business is faltering, the entire investment case remains extremely dependent on land-based systems; however, German export licenses continue to be a meagre trickle in this area, which calls for caution regarding upcoming tenders.
According to mwb research, the quality of earnings is equally uninspiring: recurring revenue remains modest, and upon closer inspection, the recent upward revision to the free cash flow forecast turns out to be merely a temporary timing effect rather than a structural improvement. Following the speculative rally, the stock is trading well above its fair DCF value of EUR 62.00, which corresponds to an ambitious EV/EBITDA multiple of about 18 for the year 2026, according to analysts. The market is currently paying full price for absolutely flawless operational execution within a defence cycle whose visibility does not even extend beyond 2035. Given the looming potential for a correction of around 23%, the analysts' crystal-clear conclusion is therefore: Sell! Their research colleagues on the LSEG platform are in a better mood. Here, a 12-month price target averaging EUR 90.50 is expected. Flip a coin!
Strategic Resources: Critical Metals Within Easy Reach of a Deep-Water Port
As the global heavy industry faces the monumental task of radically decarbonizing its emissions-intensive production, sustainable sources of raw materials are coming into focus for the global economy. This is where the Canadian resource company Strategic Resources is set to become a strategic building block for Western resource security and supply chain resilience—even though the company is still in its early stages. Rather than simply mining raw ore, the company pursues an integrated business model for refining critical metals such as iron, vanadium, and titanium. At the heart of this strategy is the BlackRock project in Québec, which is ready for construction and encompasses a massive deposit with approximately 127.8 million metric tonnes of ore reserves. At the deep-water port of Port Saguenay, CEO Sean Cleary is driving forward the construction of a state-of-the-art pelletizing plant with a planned annual capacity of 4 million metric tonnes. The DR-grade pellets produced will have an iron content exceeding 67% and be specifically tailored for modern electric arc furnaces.
IIF host Lyndsay Malchuk speaks with CEO Sean Cleary about the upcoming construction of the production facility in Québec.
Thanks to the European Carbon Border Adjustment Mechanism (CBAM), these low-emission pellets secure a massive competitive advantage in European markets. A recent milestone from June 2026 demonstrates that this technological approach is also receiving an extremely positive response in Europe. The vanadium-rich magnetite concentrate from the company's Mustavaara project in Finland was officially selected for the EUR 17 million Scandinavian research project "FutSteel." This large-scale project at the University of Oulu, in collaboration with steel giant SSAB, is investigating the complete transition of steel production to hydrogen-based processes. The selection is considered a major endorsement of the ore's quality and confirms the company's strategic importance to the next generation of fossil-free steel production. As early as May 14, the company presented itself in New York at the renowned SME Conference to leading players in global mining finance. The focus was on the strategic role of Canadian vanadium as a key raw material for US battery solutions, particularly for military applications and heavy-duty industrial vehicles. This outlook is based on a memorandum of understanding with Tyfast Energy, which aims to drive the rapid development of an independent vanadium battery value chain. The metal is considered an indispensable raw material for long-lasting vanadium redox flow batteries, which, as large-scale stationary storage systems, balance out fluctuations in renewable energy within the power grid. For forward-looking investors, a look at the key figures reveals extreme undervaluation, as the feasibility study shows a post-tax net present value of CAD 1.93 billion, while the market capitalization stands at only about CAD 16 million.
The stock markets seem to be slowly noticing individual instances of overvaluation. There is a strong trend in the AI, chip, and high-tech sectors that is slowly approaching its limits amid rapid growth. The defence sector is also faltering and has fallen significantly from its highs. Investors who want to get in on the initial expansion of a mining operation should take a closer look at Strategic Resources. The stock is significantly undervalued compared to the confirmed project values.
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