"Freedom itself was attacked this morning by a faceless coward and freedom will be defended... We will not tire, we will not falter, and we will not fail." - George W. Bush, 09.11.2001
These words truly echo the sentiments of the U.S. citizens as we mark the 15th year of the dreadful 9/11 terror attacks that reshaped the geopolitical equations of the country. The indomitable American spirit and sheer resilience is clearly visible in one of the most remarkable turnarounds in the history thereafter, as the country shook off its angst and turned the tables by unceremoniously ending the life of the alleged terror mastermind.
Since then, terrorism has changed hands to the more radical extremist group in the form of the IS. However, the "Never Say Die" attitude is perhaps one of the fundamental reasons why the country has been able to rise against adversities, time and again. As a case in point, let us look at what happened to the U.S. equity market, following 9/11.
The Stock Market Reaction
After the news of the terrorist attacks spread like wildfire, the NYSE and NASDAQ remained closed from Sep 11 to Sep 17 as administrators feared market chaos, panic selling and further loss of human and financial capital. In addition, as the World Trade Centers housed several trading, brokerage and other financial firms, it became virtually impossible for the stock markets to function as normal trading bourses.
Reacting to the severity of the situation, the market fell 684 points - a massive 7.1% decline in a single trading day, on the first day of NYSE trading after it reopened. The Dow Jones was almost down 1,370 points for a loss of over 14% for the entire week. The benchmark S&P 500 index lost 11.6% in the week and an estimated $1.4 trillion in value was lost in those five days of trading.
Down but Not Out
Despite the mayhem, investors gradually regained their composure and began to actively trade. Consequently, it took just one month before the Dow Jones, the NASDAQ and the S&P regained the pre-9/11 price levels.
Lawrence Creatura, vice president and portfolio manager at financial services company Federated Investors, observed, "Investors realized it was not going to be an existential issue, that the country was going to get back on its feet, live another day and fight back both economically and militarily. And that gave investors confidence."
Investors even began to invest their money in sectors that took a huge beating after the daring attacks, like the airlines and the technology sector dealing in airport security. Some of the companies in these sectors have well rewarded the investors for the tremendous confidence reposed in their stocks. For example, since the 9/11 attacks and to date, aerospace firm The Boeing Company's BA shares have recorded an average return of 271.2%; security equipment manufacturer OSI Systems, Inc. OSIS had an exceptional 833.5% return; and scientific & technical instruments provider American Science & Engineering Inc. ASEI had a 225.6% return, compared with 110% for the S&P 500 benchmark index.
3 Defense Stocks to Invest on 9/11
In addition to these stocks that appear outright winners in the volatile equity market, let us take a closer look at some priceless defense sector stocks to bet on this commemorative day as a mark of respect. These stocks are backed by a favorable Zacks Rank and decent trailing four quarter average earnings surprise.
General Dynamics CorporationGD : Headquartered in Falls Church, VA, General Dynamics engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation.
This Zacks Rank #2 (Buy) stock is currently trading at a forward PE of 15.8x and appears to be a solid pick with trailing four quarter average positive earnings surprise of 6.5% and an average return of 267.7%, post the 9/11 attacks to date.
Engility Holdings, Inc.EGL : Headquartered in Chantilly, VA, Engility offers professional technical and consulting services to public agencies at various levels of government in the U.S. This stock boasts a specialized talent base with consistent performance metrics. Engility has a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
With a forward PE of 22.1x and a trailing four quarter average positive earnings surprise of 12.1%, Engility surely appears to be great stock.
Leidos Holdings, Inc.LDOS : Founded in 1969 and headquartered in Reston, VA, Leidos offers solutions and services for the national security, health, and engineering markets across the globe. These include technology, intelligence systems, command and control, data analytics, cybersecurity, logistics, and intelligence analysis and operations support services for critical missions.
With a forward PE of 13.2x and long-term earnings growth expectations of 10%, Leidos is a solid pick. This Zacks Rank #2 stock has a trailing four quarter average positive earnings surprise of 7.9%.
Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany, perfectly summed up, "If we compare the impacts on stock markets there has been a pattern visible showing that the negative impact has declined over time. Investors got used to such attacks, we have seen over time looking at 9/11, London, Madrid and most recently in Paris and so on….." Meanwhile, at the moment, investors should be better off investing in these priceless defense stocks to churn attractive yields from the volatile market.
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