Inside Saxo’s defence theme

Key takeaways

• Defence demand is structural and multi-year, not a quick cycle.
• Spend clusters in munitions, air defence, drones, and logistics.
• Saxo’s Defence Theme provides a curated, diversified view of global defence companies across the value chain.

Why it matters now

Security has moved from optional to essential. Governments are refilling stockpiles, protecting airspace, and hardening ports, grids, and data networks.

Procurement runs on multi-year plans with milestone payments, which gives companies visibility even if deliveries arrive unevenly. The theme is broader than fighter jets. Sensors, software, power systems, materials, and testing are part of the same buildout.

The defence value chain

Think of the theme as a chain that turns budgets into real-world capability. It starts with inputs like propellants, fuses, batteries, and specialised materials. It moves into components such as radars, seekers, data links, and rugged networking gear.

These feed systems like interceptors, drones, and command-and-control software that stitches everything together. Finally, infrastructure and sustainment keep the system running: transformers, secure depots, satellite links, training, and long-term maintenance.

Each layer taps a different budget line, but they rise together—stockpile refills pull components, integrations deepen software usage, and infrastructure extends revenue through long service contracts.

The four spending lines

Munitions and air defence. Stockpiles deplete quickly in real use, so refilling drives orders for energetics, casings, guidance kits, and complete interceptors. Air defence has moved up the queue—from short-range drone shields to layered systems that protect cities and bases.

Drones, sensors, and C-UAS. Drones are abundant and expendable. The counter stack blends radar, radio-frequency sensing, electro-optical tracking, jamming, and kinetic or directed-energy interceptors. Civil sites—airports, ports, stadiums, and power lines—need similar tools, widening demand beyond defence ministries.

Hardened logistics. Deterrence fails if equipage cannot move. Rail nodes, bridges, depots, transformers, fuel systems, and command networks must operate under stress. Dual-use infrastructure and cyber-physical resilience increasingly count as defence outlays, pulling in utilities and industrial suppliers.

Policy to contracts. Policy sets the floor; signed orders unlock cash. Multi-year procurement laws, joint buys, and export credits reduce financing risk and improve schedule certainty. The edge is spotting when text turns into funded, staged deliveries.

Inside Saxo's defence theme: companies and roles

The theme spans large primes and specialist suppliers. The composition follows clear rules and is reviewed periodically to stay aligned with the theme. Examples include: 

RTX. A leader in air-defence radars and interceptors. Its layered systems and sensors sit at the heart of modern airspace protection, with long service tails and frequent upgrades.

Lockheed Martin. Integrated missiles and platforms. Strength in guided systems and sustainment means revenue that extends well beyond initial deliveries.

Northrop Grumman. Mission systems and missile defence. Deep capability in sensors and command software that connect shooters and sensors into one picture.

BAE Systems. European prime spanning air, land, and electronic warfare. Exposure to UK and EU rearmament and long-dated support contracts.

Rheinmetall. Ammunition, vehicles, and energetics. Direct lever on shell production and capacity expansions tied to funded stockpile refills.

Leonardo. Radars, helicopters, and electronics. Dual-use demand across civil and defence widens the customer base and smooths cycles.

Saab. Air-defence, sensors, and C-UAS. Niche strengths in Northern Europe with a focus on rapid deployment and interoperable kits.

The role in a portfolio

Defence can sit as a growth sleeve backed by policy and long order books. It can also diversify portfolios tilted to consumer tech or discretionary spending. 

A practical approach is to diversify across the value chain rather than pick a single feature. That means combining primes with specialists in sensors, software, power, energetics, and infrastructure. This approach can reduce single-programme risk and smooth cash-flow profiles across different procurement cycles. For inspiration, visit our theme hub where you find a curated list of companies across the value chain to research further.

Key risks

Defence is a long game, but not a straight line. Projects can slip when tests fail, parts arrive late, or costs climb. Supply is tight in energetics, semiconductors, and skilled labour, which can slow ramps. Budgets can change after elections or when deficits bite, delaying or cancelling orders. Policy also matters. Export controls, embargoes, or sanctions can close markets overnight. Fixed-price contracts shift inflation and rework costs to suppliers.

After strong runs, valuations can reset fast. Operations carry risk too, from accidents to cyber incidents. Currency swings and thin liquidity amplify moves, especially in smaller names. To manage these risks, track budgets and procurement (annual defence laws, EU joint buys, multi-year frameworks), capacity signals (funded plant expansions, long-lead orders, delivery milestones), and policy and exports (licensing decisions, coalition purchases, support packages).

The long game in defence

This theme is practical and patient. Refill stockpiles, shield the skies, and harden the backbone of logistics. As procurement advances, focus on funded ramps, milestone deliveries, and cash conversion rather than headlines.

The opportunity spans household-name primes and the less-visible suppliers that make systems work together. A diversified approach lets you follow the buildout without relying on a single programme or product.