MoneyTalks: The aerospace, defence and tech sectors are heating up – here are 3 stocks to watch
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MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Cyan Investment Management director and portfolio manager Dean Fergie who has more than 25 years’ experience in the funds management industry covering all major asset classes.
The first sector Fergie suggests investors should look at is the aerospace/defence sector.
“It’s has been incredibly beaten up recently,” he says.
“There’s been a huge drop off in airline traffic globally which is rebounding quickly, and I think with all the geopolitical unrest with the war in Ukraine it has governments and industry really focusing on defence and that is only likely to increase.”
The tech space is another sector that has been incredibly beaten up, Fergie adds.
“Stocks are off their highs by 50 to 90 per cent – those highs were probably previously too high, but I think there is some genuine value coming into these stocks that we haven’t seen for three to four years.”
From an investment perspective, Fergie says there is a bearish trend driven from overseas.
“A lot of it is driven from overseas, we’ve seen the NASDAQ get crunched and that all trickles through our local market.
“Meanwhile, it’s been a little bit of a dot-com boom over here, where during COVID everyone was at home day trading and pushing a lot of these stocks to frightfully high levels.
“But that has all come crashing down. However some of these stocks have good underlying businesses and the thing with anything that is software based is that it is incredibly scalable.
“You don’t have to build out a network of roads, ports, or warehouses – you just roll out more software and so your leverage in terms of moving customer growth through the bottom line is very, very strong.”
One local stock that Cyan Investment has been invested in for a long time is QHL, an Australian manufacturer of high-end carbon fibre products for F35 fighter jets and other military aircraft.
“They have just bought a maintenance division of Boeing and it is all business that until recently was quite depressed,” Fergie says.
“The company has become incredibly cheap, and I think there are some huge tailwinds – both in terms of domestic and international travel and in terms of defence.
“I think Quickstep has a positive outlook going forward and it’s one that is worthwhile having a look at.”
ALC provides software to hospitals for decision making and patient tracking.
“The stock peaked at 48 cents and is trading at below 20 cents now – it has some strong recurring revenues and is winning new contracts,” Fergie says.
“I think there is enough momentum in the business that over the next couple of years it will really start to prove itself up and investors will look back at this moment in time and go ‘gee that was a bargain being able to pick that company up for that price’.”
Fergie says Raiz is a tech company in the fund management space which has seen huge growth in customer numbers and strong growth in funds under management (FUM).
“It has some very compelling underlying metrics and they run an ETF based portfolio so there’s no issues with active management performance,” he says.
“If we see the market start to tick back up, I think we will see retail investors ploughing money back into a company like Raiz.”
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.