3 surging ASX defence shares to buy next week

Australian defence shares have developed technologies that are sought out by countries across the world. This has resulted in a mini-boom

| More on:
piggy bank next to miniature army tank

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX defence shares have attracted global attention as international tensions increase. The Prime Minister recently said we are entering a world that is more uncertain than it was in February. Accordingly, Australia has announced a range of spending initiatives to better secure our country's defences over the next decade. Furthermore, we are also seeing additional defence spending activity elsewhere around the world.

One example is the Japanese Memorandum of Understanding that formalises Australia and Japan's plans to work more closely together on space and defence sectors. A second example is the US$50 million in funding from the United States government to Austal Limited (ASX: ASB). This is to maintain, protect, and expand US domestic production of steel shipbuilding capabilities for capital projects over the next 24 months. Consequently, we are seeing a mini-boom in ASX defence shares. On that note, let's take a look at three defence shares that have done very well recently.

3 surging ASX defence shares 

DroneShield Ltd (ASX: DRO)

DroneSheild has made two strong announcements this week, taking its market capitalisation to $40.39 million. The company specialises in drone security technology and is a world leader in the field. Earlier this week, it announced new contracts with both the US defence forces and the European Ministry of Defence. This builds upon an already expansive client list which also includes the European Union Police.

Dronesheild saw its share price rise by 33.33% across this week. However, it is still down by over 40% in year to date trading due to the coronavirus market crash. I think this ASX defence share is likely to see an increased level of sales due to the proven capability of its product.

Orbital Corporation Ltd. (ASX: OEC)

Orbital has enjoyed a share price increase of only 0.79% this week. However, over the past month the share price has risen by approximately 73%. The company provides propulsion systems for small unmanned aircraft or drones. In the past month, the company had a visit from the Minister for Defence, the Hon Linda Reynolds, reminding the market that Orbital is already an accomplished defence contractor.

In addition, this ASX defence share received a new contract with Northrop Grumman to design and develop a hybrid propulsion system. This will combine an electric motor with the company's flight-proven engine. The company has a current valuation of $99.31 million.

Xtek Ltd (ASX: XTE)

Xtek is a very interesting company for me. Its share price is level for this week but up by 12.7% over the past month. The company has developed a patented technology called XTclave for curing and consolidating composite materials. Xtek has already installed an industrial sized machine in its Adelaide premises. This is large enough to support ~$40 million in revenues per year, and Xtek is also looking to install another one at its recently acquired US base.

This technology is used to produce a range of products, including; armour, lightweight tactical and human carriage equipment, robotic mechanical systems and unmanned craft. In the past 2 months, this ASX defence share has announced additional contracts with the Finnish Defence Forces and the Australian Defence Forces as well as a grant from the Australian Space Agency. 

Foolish takeaway

Australia has a good number of technologically advanced defence contractors. While most of us focus on Austal and Electro Optic Systems Holdings Limited (ASX: EOS) there are also many smaller ASX defence shares that have developed technologies other countries are willing to pay for.

Daryl Mather owns shares of Austal Limited and Electro Optic Systems Holdings Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Austal Limited, Electro Optic Systems Holdings Limited, and Orbital Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man looking at his laptop and thinking.
Share Market News

5 things to watch on the ASX 200 on Tuesday

It looks set to be a tough session for local investors today. But why?

Read more »

Man standing on rock next to turquoise salt lagoon.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors enjoyed a great start to the trading week today.

Read more »

a business person checks his mobile phone outside a Wall Street office with an American flag and other business people in the background.
Share Market News

ASX 200 stocks I'm buying and selling BEFORE the US presidential election outcome

The ASX 200 could see some big moves on Wednesday in the wake of a huge US election.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Amcor, Boss Energy, Brickworks, and Mineral Resources shares are tumbling today

These shares are starting the week in the red. But why?

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Share Gainers

Why Austal, Breville, Telix, and Westgold shares are pushing higher today

These shares are starting the week positively. But why?

Read more »

Multiple percentage signs in the palm of a man's hand.
Share Market News

What's going to happen with interest rates tomorrow? Here is CBA's take

CBA expects some 'shifts in language' from the Reserve Bank on interest rates tomorrow. Here's why.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these stocks.

Read more »

Sad shopper sitting on a sofa with shopping bags.
Opinions

Is the Wesfarmers share price a buy? Here's my view

Is the Bunnings owner a buy at this lower valuation?

Read more »