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June 23rd, 2022 | 12:59 CEST

SPD's Klingbeil: Germany as a "leading power" - Rheinmetall, Kleos Space, Airbus

  • Space
  • Defense
  • armaments
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Armaments were long considered the "grubby child" of the capital market. The trend toward ESG-compliant investments ensured that the defense industry was excluded from many investment instruments from the outset. But then came February 24 with all its consequences. In the meantime, even SPD party leader Lars Klingbeil has come out in favour of Germany assuming the role of a "leading power" in military and diplomatic matters. Although the connection between "leadership ordered" and "leadership received" in Germany under Federal Chancellor Olaf Scholz is not so clear so far, the political mills grind slowly, as is well known - especially in Germany. It is a good thing that rearmament is an international trend - at least for investors. We take a look at three stocks.

time to read: 3 minutes | Author: Nico Popp
ISIN: RHEINMETALL AG | DE0007030009 , KLEOS SPACE CDI/1/1 | AU0000015588 , AIRBUS | NL0000235190

Table of contents:

    Rheinmetall: New high - what is next?

    The Rheinmetall share is one of the top choices for German investors when it comes to armaments. In addition, the Company also benefits from its business with the automotive industry. The share recently reached a new all-time high and crashed soon after. However, if we look at the price trend from a medium-term perspective, the recent minor setback is not a cause for concern. After shares form a new high, it is not unusual from a chart perspective that they initially correct to the level of the previous high. If this previous high is not undercut, it becomes a support zone - and the price turns upward again.

    In view of the tailwind for arms spending throughout Europe and the now also clearer signals from the partly pacifist governing party SPD for more military involvement in Europe, Rheinmetall should be promising. The war in Ukraine could last longer than expected and result in an East-West tension similar to the Cold War, characterized by armament. Rheinmetall is perfectly positioned to profit from this.

    Kleos Space: Satellite data as a growth area

    One company that should benefit from increased arms spending, just like Rheinmetall, but at the same time has a digital business model is Kleos Space. Kleos Space operates several satellite clusters that orbit the earth and monitor radio activity. Using its software, it manages to evaluate this radio activity and extract information from it. The aim is not to eavesdrop on people but to predict certain events. This could involve the movement of pirates, for example, or people smugglers trying to circumvent border controls. Kleos Space also works with intelligence agencies and other security authorities. In October, the Company plans to use SpaceX's planned rocket launch to put a fourth satellite cluster into orbit.

    Kleos Space will then cover 119 million sq km of territory daily and fly over prominent regions up to 5 times a day. So far, Kleos Space has already focused on promising regions and has cooperation partners, such as the US Navy. Kleos Space has entered into a research and development agreement with the military, which will incorporate data collected via satellites to gain new insights in the areas of reporting, embargo, search and rescue, smuggling, fishing, border control and resource management. Kleos Space's stock has recently declined and is trading well below its high. The share price decline is due to Kleos being a growth company, and some investors have turned their backs on this sector. Those interested in the business model and who see a future in it can look for an anticyclical entry at the current level.

    Airbus wants a big piece of the 100 billion pie

    The development of Airbus shows that not everything is running smoothly, even for the big players in the sector. The share has lost around 9% of its value on a three-month horizon. However, the ILA air show in Berlin-Schönefeld, which began on Wednesday, could provide a tailwind. The focus this year will be on combat helicopters and transport aircraft. The A380, which has already been partially phased out, is also expected to take off. Although Airbus CEO Michael Schoellhorn expects his Company to receive a "fair share" of the planned EUR 100 billion in special funds for the German Armed Forces, there will be no significant impetus for the share price.

    The fact that investments in the military are not a foregone conclusion, even for companies, is shown by the example of the Airbus share. On the other hand, Rheinmetall looks better and could soon reach a new high. If the mood among major defense companies brightens, second-tier stocks will likely follow suit. As an innovative data provider with satellites in orbit, Kleos Space could become exciting again in the medium term. However, investors should be aware that this is a growth company.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Nico Popp

    At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.

    About the author

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