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US Considers Military Base in Poland: Defense Stocks in Focus

Zacks Equity Research
A possible U.S. military base in Poland will bring its troops face-to-face with Russia, putting defense stocks in investors' watch list.

The Polish government’s recent request for a permanent U.S. military base in Poland could prove beneficial for the U.S. defense sector. President Donald Trump not only acknowledged Poland’s concerns about Moscow’s aggressive activities in the region, but also gave an affirmative reply.

During a White House meeting earlier this week, Trump’s Polish counterpart Andrzej Duda requested Trump for firm U.S. military presence in his country, citing Russian threat because of Poland’s strategic location. He even offered financial backing for the project and suggested that the base might be named Fort Trump.

Poland’s eagerness for American foothold to deter Russia and develop a strong defense against it could be a boon for U.S. defense companies. Trump is already taking active steps to counter any military threats from Russia by raising the defense budget and closely watching the military activities of the former.

Poland’s interest in accommodating a permanent base for the U.S. military isn’t new. The fellow North Atlantic Treaty Organization (NATO) nation has been reaching out to Washington for months, offering up to $2 billion to assist in funding the base which is only a fraction of what will cost the United States to set up the establishment. The United States rotates its troops in Poland at present but permanent settlement would call for additional expenditures toward facilities.

“We’re looking at it very seriously, I know Poland likes the idea very much, and it’s something that we are considering, yes,” Trump told the press during the Oval Office meeting on Sep 18.

Although Trump voiced his keenness for the project, U.S. Defense Secretary James Mattis said that the country’s military is still looking at options, making it very clear that no decision had been made on that front.

Since Poland’s request comes as more of bilateral agreement instead of seeking other NATO allies for assistance, it would give the United States more charge on the NATO-Russia border, bringing it face-to-face with Russia.

Apart from that, permanent U.S. troops in Poland could give rise to tensions between NATO and Russia. When news of Poland’s request to U.S. first surfaced in May, Russia warned that the move could weaken stability in Europe. However, given the large number of Russian troops at the NATO border, it’s unlikely that a fraction of U.S. troops could hinder peace in Europe.

In addition, Russia’s military advances and active development of nuclear weapons are difficult for NATO to counter, which makes the American military’s permanent move into Poland a much needed one.

The following defense companies that bear a Zacks Rank #1 (Strong Buy) or #2 (Buy) could be worth monitoring at present.

Aerojet Rocketdyne Holdings, Inc. AJRD develops commercial, civil and military systems for the defense and aerospace industries. Aerojet Rocketdyne carries a Zacks Rank #1 and its shares have gained 8% year to date.

AeroVironment, Inc. AVAV is engaged in designing, developing, producing and operating a range of products and services for government agencies, businesses and consumers. The company primarily focuses on unmanned aircraft systems and efficient energy systems. The company carries a Zacks Rank #1 and its shares have gained 103.8% year to date.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Engility Holdings, Inc. EGL provides government services in engineering, professional and mission support to customers in the country’s Department of Defense, Federal civilian agencies and allied foreign governments. The company carries a Zacks Rank #2 and its stock has gained 21% year to date.

Huntington Ingalls Industries, Inc. HII designs, builds and maintains nuclear and non-nuclear ships for the nation’s Navy and Coast Guard. It also provides after-market services for military ships worldwide. Huntington Ingalls has a Zacks Rank #2. The company’s shares have gained 7% year to date.

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