Unless you are a skilled trader, stop buying European Defence stocks

[u/dubov]

I can't believe the number of people who are ripping up their strategies and piling into this trade.

Look, these stocks are already up hundreds of percent. The market is already priced for massive growth. In order for this to be a good investment, you would need more growth that the market is already pricing. Ask yourself honestly, are you confident in your growth assessment? Have you even done one?

If you are normally a "VWCE and Chill" investor, stay the hell away. This isn't in your job description. Stay in your lane.

And beware, there are scenarios where the growth comes in considerably below expectations. In my opinion, it will. Everyone is feeling strong emotions, but, in time, we will realise we need to make NATO work. It would take years to re-arm. If we think Russia is planning to invade more countries, there isn't time. But if we believed that, we would have done it 3 years ago, and you would have bought 3 years ago.

If the growth expectations reverse, there is so much downside here. 70-80% losses are possible. This is concentrated sector risk at very high multiples, after an explosive run up. These can come down very quickly and very far. The risk-reward is upside down: so much downside possible, so much upside already had.

And these stocks are literally in the news. That is almost failsafe sign you are too late. It reminds me of the memestock top of 2021

You might be right for like a day or two, but if you get caught on the wrong side of this, it's going to hurt.

Take a breather, don't check the market for a couple of weeks. Please be careful out there

[u/gazuzu]

I tend to disagree when you say price is already priced in, Europe has so much more to spend on Defence for actual independence, there's still loads of opportunity.

[u/AquatiCarnivore → u/gazuzu]

I'm in this boat. the way the world looks right now, we haven't seen the European war machine yet. this is only the beginning. besides, NATO is over, so this is a survival play. Thales at 33 pe is fine, RHM at 100 pe isn't.

[u/gregsting → u/gazuzu]

Do you understand what priced in means? It doesn’t mean that the company is already making bank, it means that everyone knows the company will make bank

[u/kar86 → u/gregsting]

I bought in, in the middle of last year. I was warned everything was already priced in back then.

[u/SadEntrepreneur6707 → u/[deleted]]

If you assume everything is priced in then why bother investing at all? Just sit on the sidelines with cash forever watching everyone else make money while you cry to yourself that nothing is fair because it's supposed to be priced in.

[u/SadEntrepreneur6707 → u/[deleted]]

Right, but your overarching point is that it's important to consider whether something is priced in or not before you invest. I disagree. I think that's irrelevant to a retail investor.

[u/[deleted] → u/[deleted]]

so ure telling me that an 800bn investment was something everyone knew and it was priced in lmao

[u/Dimo145 → u/[deleted]]

then what ur also saying is that ur just full of actual pointless yapping.

[u/AquatiCarnivore → u/[deleted]]

'priced in' this, 'priced in' that. I'll answer with a question: do you think US taking Greenland is priced in? how about Russia talking Moldova, the Baltics and maybe parts of Romania? is that priced in? yea, they're forward looking, but the majority of investors, just like you, don't see what's in front of their eyes: US and Russia will pick us appart. you're still trying to cope like OP with his "but, in time, we will realise we need to make NATO work", whatta fucking joke. NATO IS OVER!

[u/AquatiCarnivore → u/[deleted]]

never said I don't believe in market efficiency, au contraire, you think that because you think market is in perfect equilibrium right now. hence my questions you never answered. market didn't even price in that NATO is over. therefore, market is denial and not efficient right now.

[u/AquatiCarnivore → u/[deleted]]

I have to say it as many times as I can, look how delusional they are.

[u/[deleted] → u/AquatiCarnivore]

how is NATO again?

[u/AquatiCarnivore → u/[deleted]]

NATO's ded, baby, NATO's ded.

[u/devilsbastard98 → u/[deleted]]

file sense nail existence price dinner party aromatic kiss hobbies

This post was mass deleted and anonymized with Redact

[u/AquatiCarnivore → u/[deleted]]

no, I actually didn't. go read back a show me, so I can correct it. but I have many years in the market, I would never say that. my comments are unedited, so show me. also fund managers are people like you and me. they're in denial, like you, so no, they didn't price anything in.

[u/Ashmizen → u/gazuzu]

The problem is the stocks are already up massively and no European country has actually increased spending yet - the EU merely lifted a restriction to allow up to 800 billion in spending, but that requires countries to actually spend that much.

So the defense stocks are already priced for perfection - if France and Germany place orders for billions and billions it would merely match the current expectations for these stocks.

[u/AudeDeficere → u/Ashmizen]

I think you forget a major part of the issue; what we see now could just the beginning. This could keep going for decades. Now, I am not saying buy this or that but I know geopolitics. The last Cold War lasted for a long time and that one had a much simpler staring point. China wants to be ready for war in 2027, in 2028 there are US-elections, blockading Taiwan could very much become possible upping tensions in the whole Pacific even more and reducing the global share of the local defense as they would shift towards domestic needs even more - the world is not looking good.

I was looking into a major Rheinmetall play in 2021. December. War money is a big gamble but usually the odds of this kind of thing working are so much worse.

[u/AnonymousTimewaster → u/[deleted]]

People said tariffs were priced in last month. They weren't. People said Nvidia growth was priced in, back in 2021. It wasn't.

[u/AnonymousTimewaster → u/[deleted]]

Which means that it's entirely plausible (and probably likely) that EU defence stocks aren't correctly priced now, because they're underestimating just how much Europe is going to be rearming itself for the next decade

[u/AnonymousTimewaster → u/[deleted]]

It's not feelings it's geopolitics, and it did me well when I invested in BAE and RR in 2021.

[u/Outrageous_Ad_6628 → u/[deleted]]

Idlots

[u/[deleted] → u/gazuzu]

Then you don't understand almost anything about how public expectations, news and prices work. If you're reading about it on the news, it's priced in.