Even After Trump's Tariff Turmoil, Defense Stocks Cost Too Much

Core Viewpoint - Defense stocks are currently considered too expensive for investment despite ongoing global tensions and increased defense spending [1][8]. Group 1: Current Valuation of Defense Stocks - The average price-to-sales (P/S) and enterprise-value-to-sales (EV/S) ratios for defense stocks remain elevated compared to historical norms, indicating that they are still overpriced [8]. - As of now, half of the ten major defense stocks are trading at higher valuations than in January, while the other half are slightly cheaper but overall valuations have not significantly changed [2][8]. - The average EV/S ratio for the defense sector is currently 2.15, compared to an average of 1.89 over the 2014-2023 period, suggesting a continued increase in valuation [7]. Group 2: Historical Valuation Data - Historical analysis shows that the average EV/S ratio for major defense companies has increased from 1.06 (2004-2013) to 1.89 (2014-2023) [5]. - Specific companies like Boeing and L3Harris Technologies have seen significant increases in their EV/S ratios, with Boeing at 2.46 today compared to an average of 1.36 over the last 20 years [5][7]. Group 3: Potential Investment Opportunities - Leidos Holdings is identified as a potential value option, trading at an EV/S of 1.4 and a P/S of 1.2, which is close to its historical fair value [9]. - Leidos operates in multiple sectors, including national security and healthcare, which may provide additional growth opportunities beyond defense spending [9].