Mark Sharogradsky
Managing Partner & CIO of Kepler Capital, Value Investing
Theon International is a European defense company with excellent management, executing a roll-up strategy with huge tailwinds from European defense spending. Focused on night vision, it just bought a counter-drone company. Fundamentals improved in the latest quarter, yet the stock is down big on broad defense-market bearishness and sits within 10% of its trailing lows. x.comÂ
Non-ITAR defense suppliers such as Electro Optic Systems, BAE Systems, Theon and Rheinmetall are an overlooked source of alpha as Europe, Asia and the Middle East shift defense spending away from US ITAR-controlled equipment. That shift comes with huge spending, yet US-based investors misunderstand it and wrongly call defense tech dead. Eurosatory confirmed the view, and the big alpha is not in drone builders. x.com x.com x.comÂ
European defense tech clearly leads US peers in battlefield impact, getting real-world combat validation years ahead of most legacy US primes' roadmaps. US allocators still treat Europe's sovereignty buildout as a sentiment trade rather than the multi-year EU procurement policy it actually is. This answers @LarsenJensenUSA asking whether European defense tech has had a greater battlefield impact than American firms. x.comÂ
Hyundai Rotem looks interesting as defense demand stays strong and valuations have become more reasonable. Defense order backlogs extend into 2030, and the 'end' of the Iran conflict has resumed contract discussions in the Middle East. Hyundai Rotem makes tanks, and Nippon Avionics, an information-systems maker, also looks interesting in Asia. x.comÂ
Defense is the sector money is likely to rotate into heavily over the coming weeks and months, favoring nLIGHT and LightPath. Per @BlackScholesMan, the Iran war exposed serious shortfalls in Western defense that need to be plugged, and the money will follow. x.comÂ